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Ukraine to import more EU gas, citing Russia crisis

04.25.2014  | 

Ukraine is seeking to import more natural gas from Europe via Slovakia as Russia demands an extra $11.4 billion for contracted fuel and clashes with pro-Russian forces in the country’s east escalate.



Ukraine is seeking to import more natural gas from Europe via Slovakia as Russia demands an extra $11.4 billion for contracted fuel and clashes with pro-Russian forces in the country’s east escalate.

The European Union, Slovakia and Ukraine are meeting in Bratislava, Slovakia, on Friday to discuss imports from the west to reduce Kiev’s dependence on Russian gas. European supplies could replace less than half of imports from Moscow-based OAO Gazprom, according to data compiled by Bloomberg.

“It is not a long-term solution in terms of diversifying away from Russian gas,” Simon Pirani, a senior research fellow at the Oxford Institute for Energy Studies, said yesterday by phone. “What we have to remember is that, in any case, the vast majority of gas volumes in that part of Europe are going to originate in Russia.”

Ukraine and Slovakia have so far been unable to agree on terms and volumes of flows from Europe. The EU and the US are jointly seeking alternative supply sources to Ukraine, including reversing pipelines amid the worst standoff between Moscow and the West since the Cold War, spurred by the new Kiev government’s plans for closer ties with the EU.

Slovakia, a transit country for the fuel, pumped more than 50 billion cubic meters from Gazprom through its pipelines to European nations last year, or about a third of the world’s biggest gas exporter’s sales to the region, according to data from Eustream, the Slovakian pipeline operator, and Gazprom’s export unit. That compares with 5.4 billion cubic meters Slovakia imported for its own needs, according to Gazprom.

Commercial Problem

“We can say quite clearly that there is a commercial problem, in the sense that Gazprom is obviously a very large client for Eustream, and obviously it is not in Gazprom’s commercial interests for reverse flows deliveries to start,” Pirani said.

Russia shipped 25.8 billion cubic meters of gas to Ukraine last year, including supplies to state-owned NAK Naftogaz Ukrainy, or about 71 million cubic meters/day, meeting half of the nation’s demand, according to data from Gazprom.

Eustream last week offered to start reversing supplies to Ukraine in October. The flows would be about 8.8 million cubic meters of gas/day, or 3.2 billion cubic meters a year, said Vahram Chuguryan, a company spokesman in Bratislava. That’s enough to replace 12% of Ukraine’s imports from Russia, according to data compiled by Bloomberg.

The European Commission is “confident” that a memorandum of understanding on reverse flows can be signed between the two pipeline operators Eustream and UkrTransGaz in Ukraine, the EU’s regulatory arm said.

Today’s Meeting

Slovakia’s Economy Minister Tomas Malatinsky, Ukraine’s Energy Minister Yuri Prodan and EU Energy Commissioner Guenther Oettinger will all attend the 3 p.m. meeting.

The new fuel bill from Moscow is for contracted gas that Ukraine failed to buy last year, Sergei Kupriyanov, a spokesman for the Russian state-controlled exporter, said today by phone. Naftogaz was obliged to pay for 41.6 billion cubic meters of gas in 2013 under a take-or-pay contract, whether or not the volumes were imported, he said. The charge follows a separate bill for $2.2 billion for unpaid past supplies.

Russia is ready for talks with the EU and Ukraine on April 28, Olga Golant, a Russian Energy Ministry spokeswoman, said today by phone. No date or venue for negotiations with Russia has been set yet, Sabine Berger, a spokeswoman for the EU’s Oettinger, said today.

Gazprom doubts it is possible to ship gas from Europe to Ukraine’s central or eastern regions, CEO Alexey Miller said on April 5, according to Interfax. Kupriyanov declined to comment on reverse flows.

Poland Flows

Ukraine can also import about 4 million cubic meters/day, or 1.5 billion cubic meters of gas/year, from Poland, according to Naftogaz and Polish state-run pipeline operator Gaz-System.

Supplies from Poland began this month under a deal with RWE, Germany’s second-biggest utility.

Hungary may supply fuel to Ukraine through a separate pipeline with annual interruptible capacity of about 6.1 billion cubic meters, or 16.8 million cubic meters/day, according to the national pipeline operator FGSZ.

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