Ukrainian gas market reforms could be credit positive for the Ukrainian government, Standard & Poor's said in an analytical report.

Recent attempts by Ukraine, which is heavily dependent on Russian gas, to look for alternative sources of gas could improve the situation with the budget and current account deficits, the agency said.

The gas market's structure and existing pricing principles will be credit negative for Ukraine until the government takes substantial measures to alter the situation, the agency said.

Ukraine has one of the world's most gas-intensive economies: its "gas deficit" is Europe's fifth largest and is approaching that of the wealthier France, Britain and Spain. The high cost of importing gas heightens foreign economic risks for Ukraine, and the distortion of prices for households and public-sector consumers that has resulted from government policy are putting the budget under additional strain and mean that energy is not being put to efficient use.

S&P, which downgraded Ukraine from "В+" to "В" in December, said Ukraine produces around 20 billion cubic meters of gas per year and imported 45 bcm from Russia's Gazprom in 2011. Gas imports fell to 30 bcm in 2012 and look like falling to 20 bcm in 2013 as the country's own production increases and alternative sources of gas are tapped.

Prices rose last year, by 37% to $424 per thousand cu m, so reducing imports will not improve the current account deficit. S&P said it did not think planned volumes and prices for gas that imports from other European markets would have a meaningful impact on the cost of gas imports by Ukraine. The cost of importing gas that has been re-exported or supplied under spot contracts from Germany would be $410-415.

S&P said Ukraine would have a current account deficit of around 6% of GDP until 2015 and its external funding requirements would stay high.

The agency said any decision by Ukraine to import less gas from Russia would involve reviewing the agreement that Ukraine's Naftogaz signed with Gazprom in 2009, however Ukraine's negotiating position is fairly weak: the existing contract suits Gazprom because Ukraine pays it more for gas than other European buyers.