OREANDA-NEWS. Ukrainian state-controlled oil producer Ukrnafta plans to set up a gas trading business in the country.

"I would like to introduce a much more active gas trading activity in Ukrnafta," chairman Mark Rollins told the Ukrainian Energy Forum in Kiev, organised by Adam Smith conferences.

Ukrnafta has not established a trading arm and Rollins did not give a timeline for starting the business. The plan is part of the firm's strategy up to 2025. But Ukrnafta is looking for staff to work in a trading wing, which could be a profitable business, Rollins said.

European hub prices have opened a discount to Ukrainian industrial prices, which could allow gas importers to make a profit on trading.

State-owned gas firm Naftogaz said in January that it could make a profit by importing gas from the EU for sale to Ukrainian customers. The company is paying about $175/'000m3 for its imports and selling to the domestic market at 6,600 hryvnia/'000m? ($250/'000m3), according to one of the country's largest gas consumers, Odessa Portside Plant's first deputy director Mykola Shurikov.

More firms have been importing gas this year, with 20 importers operating last month, state-owned system operator Ukrtransgaz said. Firms other than Naftogaz imported 25pc of the February total, Ukrtransgaz said.

The Ukrainian government has been pushing to liberalise the gas market and encourage new importers. Private-sector imports increased seven-fold to 1.1bn m3 in 2015, Naftogaz said.

Ukrnafta would be one of the largest participants in the Ukrainian market, although Naftogaz continues to account for the majority of the country's supply. "I would like to be able to buy as well as sell gas. We are not a big player in the market, but I would like to introduce some more competition into the market place," Rollins said.

The oil firm accounts for more than 90pc of Ukraine's crude output and is the country's second-largest gas producer. Its gas production has been in decline in recent years — dropping by 13.5pc to 1.5bn m3 last year — but Ukrnafta plans to increase output by 50pc by 2025.

Ukrnafta has pushed for tax breaks to encourage new domestic production. The firm has asked the government to halve the subsoil tax when crude prices are between $30/bl and $60/bl and set it to zero when crude prices are below $30/bl. The firm pays a 45pc subsoil tax on its crude sales.