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Tension in Ukraine may inflate European gas prices next winter — Eni’s CEO

March 18, 2014, 15:06 UTC+3 MOSCOW
Eni is one of the supporters of the South Stream pipeline project, intended to bypass Ukraine by bringing Russian gas under the Black Sea to Bulgaria and from there on to Italy
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Paolo Scaroni

Paolo Scaroni

© EPA/OLIVIER HOSLET

MOSCOW, March 18. /ITAR-TASS/. Tension in Ukraine may affect gas supplies to Europe and result in higher tariffs next winter, the Financial Times newspaper reports with reference to CEO of Italian energy giant Eni.

Paolo Scaroni said Italy, Austria and the south of Germany would be particularly at risk since they were principal markets for Russian gas piped through Ukraine. About 16 percent of European gas consumption provided by Russia came through Ukraine, the newspaper says.

Eni is one of the supporters of the South Stream pipeline project, intended to bypass Ukraine by bringing Russian gas under the Black Sea to Bulgaria and from there on to Italy.

If it is built, EU countries would probably be able to meet all their demand for Russian gas without taking any through Ukraine, the newspaper says.

In earlier events, Itar-Tass has reported radical Ukrainian deputy Oleg Lyashko as suggesting Russia be charged for sending its natural gas through Ukrainian territory to Europe at $500 per 1,000 cubic meters, and “if the Russian Federation refuses to pay the price for transit, cutting supplies immediately.”

Ukraine’s Verkhovna Rada parliament registered the deputy’s motion on March 17. This would mean that if transit remained constant, Russia would have to pay $43 billion a year.

In 2013, revenues for Naftogaz Ukrainy shipping Russian gas grew by 12.5% to $3.6 billion, the National Energy Security Foundation said in a report. Experts calculated that transit in 2013 made 86.2 billion cubic meters (bcm) against 84.3 bcm year-on-year.

Transit was rated at $3.4 per one thousand cubic meters per 100 kilometers, the report went on, and the Ukrainian parliamentarian was suggesting raising the price by 12 times. But the gas price for Europeans also contained transportation costs so European Union countries should also be prepared to pay more.

Gazprom has been working on construction of the South Stream pipeline, crossing the Black Sea towards Southern and Central Europe to diversify gas supplies to Europe and to lower the company’s dependence on transit countries.

Russia has entered governmental agreements with Bulgaria, Serbia, Hungary, Greece, Slovenia, Croatia and Austria on construction of the pipeline’s land passages.

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