Embarrassed Ukraine admits $1 billion gas deal mistake

Ukrainian Prime Minister Mykola Azarov, left, and Energy Minister Yuri Boiko, second right, talk as Vladislav Kaskiv, right, the head of Ukraine's state investment agency, and a man the state investment agency identified as Jordi Sarda Bonvehi, second left, sign what the government said was an agreement to build a liquefied natural gas terminal in Ukraine. REUTERS/Stringer
Ukrainian Prime Minister Mykola Azarov, left, and Energy Minister Yuri Boiko, second right, talk as Vladislav Kaskiv, right, the head of Ukraine's state investment agency, and a man the state investment agency identified as Jordi Sarda Bonvehi, second left, sign what the government said was an agreement to build a liquefied natural gas terminal in Ukraine. REUTERS/Stringer
Ukraine admitted it had signed a $1.1 billion gas terminal deal with an unauthorised man it thought was acting for Gas Natural Fenosa, while the Spanish company denied he was its representative and said there was no contract.

Vladislav Kaskiv, head of Ukraine's state investment agency, signed the deal in Kiev on Monday in front of Prime Minister Mykola Azarov and the energy minister.

Gas Natural quickly denied the deal, which would have formed two-party consortium with Kiev to build a liquefied natural gas (LNG) terminal on Ukraine's Black Sea coast, a project Kiev hailed as cutting dependence on pipeline gas from Russia.

After the company said the executive named by Kiev as its signatory had not even been there, the Ukrainian agency revised its statement to identify the man as Jordi Sarda Bonvehi.

Today, the investment agency official in charge of the LNG project said Bonvehi had been a middleman in Ukraine's talks with Gas Natural.

"He (Bonvehi) was organising the visit of (Gas Natural) representatives. Unfortunately, for technical reasons, company representatives did not come," the official, Vitaly Demyanyuk said, adding that Bonvehi then signed the agreement himself.

"He expected the company would (later) confirm his powers (to sign the contract)," Demyanyuk said.

Gas Natural denied on Wednesday it had given any mandate for a deal in Ukraine, reiterating its Monday statement that it was not even studying anything along the lines of an LNG terminal in the country.

"Gas Natural Fenosa is sending a formal notice to the person who, according to media reports, seems to have claimed to represent the company at an event that took place in Kiev last Monday," the company said in an emailed statement on Wednesday.

"This person does not represent the company, therefore Gas Natural Fenosa reserves the right to take such legal action as may be appropriate once the details of the situation have been clarified."

Barcelona-based Gas Natural is a leading international gas and electricity company with a presence in 25 countries. It does not have any business in Ukraine.

Ukraine's Demyanyuk declined to elaborate any further on the incident and did not say whether the agency had known Bonvehi was not empowered to sign the deal.

In addition to public embarrassment, the setback leaves Ukraine once again looking for investors in the project at a time when its budget deficit is ballooning and its economy is suffering from the euro zone troubles.

"This was most likely a result of gross negligence on part of (Ukrainian) officials," a source close to the government said.

When asked about the failed deal, a government official gave Reuters a mobile telephone number he said belonged to Bonvehi. A man answering the phone identified himself as Bonvehi and said he had signed the deal although he had not been authorised to do so.

"I thought I could sign it and then settle it with the company," he said.

Speaking in imperfect Russian, he declined to elaborate further or say which company he represented.

Reuters could not independently establish the identity of the man, who said he was in Barcelona. In a second telephone conversation in Spanish, he declined to answer questions over the phone and said he could meet with a reporter on Thursday.

State investment agency chief Kaskiv said Ukraine would press ahead with the project regardless.

"In any case, the Spanish company's possible refusal to take part in the project will not be critical," he said.

Initially he had said Gas Natural would have a 75 percent stake in the consortium and the former Soviet republic would own the remaining 25 percent

The LNG terminal would allow Ukraine to import gas from suppliers in the Caspian and the Gulf at a price much lower than that charged by Russia's Gazprom.

Ukraine's reliance on gas coming by pipeline from Russia has been a source of repeated friction between the two countries and many Ukrainians view it as an unacceptable instrument of continued influence by Moscow.

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