Ukraine's natural gas output in March fell 5.6% year-on-year to 1.68 billion cubic meters, from 1.78 Bcm in March 2013, an energy and coal industry ministry official said Wednesday, citing preliminary figures.
Production fell after the oil and gas production assets of Crimea-based Chornomornaftogaz were seized by the pro-Moscow authorities in Crimea following Russia's annexation of the peninsula last month.
Ukraine's government in Kiev together with the US and the European Union have rejected the annexation as illegal.
The Chornomornaftogaz was once Ukraine's third largest producer of hydrocarbons and the only producer of oil and gas in the Black Sea and the Sea of Azov.
Following the annexation, the Crimean authorities suggested that Gazprom of Russia must take full control over the company and develop its vast offshore gas deposits.
The takeover has not materialized yet, however, with the US imposing sanctions on Chornomornaftogaz earlier this month effectively barring the company from any international activity.
BLOW TO UKRAINE
The loss of control over Chornomornaftogaz deals a major blow to Ukraine's efforts to diversify its sources of energy away from Russia.
Chornomornaftogaz was the key to Ukraine's strategy of developing offshore deposits of gas and crude oil in the Black Sea and the Sea of Azov.
Chornomornaftogaz increased gas output by 40.6% to 1.651 Bcm in 2013, up from 1.174 Bcm in 2012, and planned to boost gas output to 3 Bcm in 2015.
In January through March, Ukraine's natural gas extraction decreased 5.1% year-on-year to 4.88 Bcm from 5.14 Bcm in January-March 2013, the official said.
Naftogaz Ukrayiny, the national oil and gas company, produced 4.18 Bcm of gas in the first quarter, down 9.5% year-on-year, while output by other gas extraction companies increased by 34.4% to 699 million cu m.
In January-March, Ukraine imported a total of 6.09 Bcm of natural gas, mostly from Russia, down 13.9% from 7.07 Bcm imported in January-March 2013, according to UkrTransGaz, the state-owned gas shipper.
PRICE HIKE
The loss of natural gas producing assets in Crimea was followed by a decision by Gazprom to increase its prices on gas supplies to Ukraine by 80% in the second quarter.
Gazprom raised the price to $485/1,000 cu m in April from $268.5/1,000 cu m in the first quarter, after canceling two separate price discounts granted to Ukraine in April 2010 and December 2013, respectively.
Ukraine said the new price is unacceptable and that the move was politically motivated.
Ukraine last week resumed imports of alternative gas supplies from Europe via Poland and is seeking to expand gas import capacities amid concerns that Russian gas supplies may be disrupted in May.
Ukraine imported about 2 Bcm of gas from Europe in 2013, of which 1.13 Bcm was supplied via Poland and 870 million cu m via Hungary, according to the energy and coal industry ministry.
Current gas supply routes via Poland and Hungary allow imports of between 7 Bcm and 10 Bcm of gas to Ukraine annually, according to Ukrainian officials.
However, opening a new supply route via Slovakia would increase such capacity to 25 Bcm/year, the ministry said.
