Ukraine will struggle to pay higher prices for Russian gas next year and will have to reduce its consumption, the head of Economic Cooperation Department of Ukraine`s Foreign Ministry, Sergiy Korsunsky, said Hursday, according to Dow Jones.

Korsunsky said he expects the price of imported Russian gas to double next year from the $179.50 per thousand cubic meters it pays currently, but Ukraine`s economy isn`t ready to meet the cost.

We need to figure out how to survive", he said. "It is somehow feasible to get gas from Azerbaijan and Iran, but the main solution to the gas problem of Ukraine will be to decrease consumption," Korsunsky said.

Ukraine is heavily dependent on imported gas from Central Asia and Russia and remains Europe`s third-largest gas importer after Germany and Italy.

A rise in the price of imported Russian gas is expected to boost domestic production. Ukraine has the fourth-largest gas reserves in Europe behind Russia, Norway, the Netherlands.

Earlier this month Mark Tolley, the Chief Executive of Cadogan Petroleum, which has gas assets in Ukraine, said rising gas prices are encouraging new investment in oil and gas production. However, analysts warned that the fiscal and regulatory regime in Ukraine needs an overhaul to meet the challenge.

Cadogan has three fields in the Poltava region in central Ukraine and two in the Carpathian region in the western part of the country. It expects to start full-scale production at its first field in the Poltava region in the second half of 2008, with the rest to follow by the end of 2009. The company will launch a $260 million initial public offering in London in June.