“If the price for domestically produced gas climbs to $250 or $280 – following the impending price hike for imported gas which may reach $350 next year – Ukrainian producers will be able to boost production considerably,” according to Q-club president and former Ukrtransnafta chairman Oleksandr Todiychuk.

“If the sale price of Ukrainian gas is raised to the market level, Ukraine will be able to increase its gas production,” he said. According to the expert, “in three to five years Ukraine may boost gas production by 50 percent, from the current 20 billion cubic meters to 30 billion cubic meters.”

“Today, gas production is in decline, because low prices set by the government and unreasonably high taxes make it unprofitable,” Todiychuk said. “Now, banks refuse loans to gas producers because these companies operate on the brink of losses,” he added.

“Such a scenario – when domestic gas production drops year by year – is extremely unfavorable for Ukraine, because domestic gas will always remain cheaper than imported fuel.” “Besides, by purchasing gas abroad, we support our suppliers’ gas industry, because gas prices always include an investment component,” he explained.

On Wednesday, the head of the parliamentary committee for fuel, energy and nuclear policy Mykola Martynenko said that in 2009, Ukrainian gas prices might skyrocket, reaching over $300 per 1,000 cubic meters.

The committee head was critical of the state policy regarding domestic gas producers, who have seen their production levels drop for the second year running.

“In fact, Ukraine is cross-subsidizing Russian and Central Asian producers. On one hand, we are paying big money for imported gas and this money is used to develop our suppliers’ economies. On the other hand, we are cutting prices for domestically-produced gas so radically that our own producers lack the funds to sustain their present production volumes. Last year, investment in the Ukrainian gas industry only amounted to 200 million hryvnias, while we need at least $500 million to boost our gas production. That’s why the government must take prompt action to create a transparent and investor-friendly environment,” Martynenko said.