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Ukraine to maintain control of its gas networks - PM

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KIEV, September 6 (RIA Novosti) - Ukraine's prime minister said Wednesday he was positive his country will not pass control over its gas pipeline networks to Russia, the Party of Regions, the largest in parliament, led by the premier said.

"Ukraine's natural gas transportation system will remain in the hands of Ukrainians," the party quoted Viktor Yanukovych as saying. "Russians will not receive control over the gas networks, but will only be able to participate in their possible reconstruction."

Yanukovych said Ukraine needs to repair its natural gas pipelines to increase transits to Europe, which will require considerable investment.

Ukraine has a total of 37,500 km of pipelines and 13 underground storage facilities. Its current transit capacity stands at 141 bln cubic meters of gas a year.

"If we talk about reconstruction, an international consortium may have to be set up. We could negotiate it with Russia, as well as other European partners."

Russia's energy giant Gazprom and Ukraine's national oil and gas company Naftogaz signed an agreement to set up a consortium to manage and develop Ukraine's gas pipeline system in 2002. Some European Union countries' participation in the consortium was also discussed.

Russia has sought to ensure reliable gas supplies to European consumers via the consortium, and Gazprom earlier showed interest in acquiring Ukraine's gas distribution network. Ukraine wanted Russia to reduce gas prices in exchange for the joint management of the consortium. The countries have failed to reach an agreement so far.

Ukraine's fuel and energy minister said September 1 that a final decision on the consortium will be made in October.

"Before the end of October, we will decide what shape the gas transportation consortium will take and will it exist at all," Yuriy Boyko said adding more economic viability estimates will have to be made.

The consortium was also to work on a $560 mln Bogorodchany-Uzhgorod pipeline in western Ukraine that would enable Russia to increase its natural gas shipments to Europe by 19 bln cubic meters a year.

Speaking about the price of Russian gas for Ukraine, Yanukovych said it should depend on "transparent market conditions," adding, however, that Ukraine will seek to reduce the price in talks with Russia.

Under the January 4, 2006 agreement that ended a bitter pricing dispute between the former Soviet allies, Ukraine imports a mixture of Russian and Turkmen natural gas at $95 per 1,000 cubic meters. The price formula is based on a European rate of $230 for Russian gas and $60 for the Central Asian republic's gas.

But Turkmenistan has recently raised the gas price for Gazprom to $100 per 1,000 cu m in 2007-2009, from the $65 the energy giant pays at the moment.

The deal is likely to influence the price of gas supplies to Ukraine, which could rise further after the January dispute, when Gazprom temporarily cut off supplies to Ukraine.

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