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EU suggests dumping gas prices for Ukraine

June 16, 2014, 18:12 UTC+3 KIEV
However, Gazprom may impose restrictions on European companies which supply gas to Ukraine using reverse-flow mechanisms, CEO Alexei Miller said
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Naftogaz of Ukraine CEO Andrei Kobolev

Naftogaz of Ukraine CEO Andrei Kobolev

© EPA/SERGEI CHIRIKOV

KIEV, June 16. /ITAR-TASS/. The European Union has offered reverse-flow gas supplies to Ukraine at a price lower than that of Russia’s Gazprom, Naftogaz of Ukraine CEO Andrei Kobolev said on Monday, June 16.

He said Ukraine had earlier asked the EU to increase reverse-flow gas supplies to the country.

The transit of gas to Europe depends on whether Ukraine’s underground storage facilities are filled sufficiently with at least 18.5 billion cubic meters of gas. According to the EU, there are 12 billion cubic meters of gas in the storage facilities now.

“The European Commission has for the first time officially asked European companies to consider buying gas for pumping into Ukraine’s underground gas storage facilities,” Kobolev said, adding, “the price of European companies is lower than that offered Gazprom subject to a discount.”

Naftogaz of Ukraine expects the EU to increase reverse-flow gas supplies for internal Ukrainian needs. Kobolev said “the request to the European Commission to increase reverse-flow gas supplies is a very important aspect”.

“Currently, Ukraine gets about 16 million cubic meters of gas in reverse-flow mode, and we will increase this volume,” Kobolev said.

However, Gazprom may impose restrictions on European companies which supply gas to Ukraine using reverse-flow mechanisms, Gazprom CEO Alexei Miller said.

“A reverse flow is a semi-fraudulent mechanism whereby gas runs in circles. But this is Russian gas,” he said.

Miller said that the points where gas was delivered to and accepted by European consumers were located in Europe, but “Ukraine uses our gas [intended for Europe] on its territory any way it likes”.

“Reverse-flow gas supplies run counter to the contracts with European companies that buy Russian gas, and for that reason restrictions may be imposed on them,” Miller said.

European and Ukrainian energy companies are now negotiating transit supplies of gas from Germany’s RWE by the auxiliary pipeline in Slovakia. Ukraine is continuing to import gas from Poland and Hungary using a reverse-flow supply scheme. “Starting from May, Ukraine has been receiving up to 14 million cubic meters of natural gas from Hungary daily in reverse-flow mode,” the Ukrainian Ministry of Energy and Coal Industry said.

“Technically, the maximum amount of 4 million cubic meters of gas can be supplied through Poland daily for the time being, or about 1.5 billion cubic meters a year,” it said.

According to Ukrainian Energy and Coal Industry Minister Yuri Prodan, reverse-flow supplies can reach 8 billion cubic meters by September 1, 2014, not by 2015. Gas will be supplied by the Vojany-Uzhgorod pipeline, not the transit pipeline.

EU Energy Commissioner Guenther Oettinger said reverse-flow gas supplies from Slovakia to Ukraine by the trunk pipeline would be impossible without Gazprom’s consent as it would run counter to the Slovak company Eustream’s contractual obligations.

However he said such supplies by the Vojany-Uzhgorod pipeline would not require the Russian company’s agreement and would give Ukraine up to 10 billion cubic meters of a gas a year.

Oettinger believes that diversification of supplies will help to solve Ukraine’s gas problem in part. However reverse-flow supplies from Poland and Hungary by the Vojany-Uzhgorod pipeline will not be enough for Ukraine get through the coming winter comfortably.

RWE AG resumed gas supplies to Ukraine through its division RWE Supply and Trading on April 15 under a five-year framework agreement with Naftogaz of Ukraine signed in May 2012.

“RWE supplies to Ukraine are based on the European pricing principles, including transportation costs. The agreement provides for the delivery of up to 10 billion cubic meters of natural gas a year,” Naftogaz said.

In 2013, RWE supplied about 1 billion cubic meters of gas to Ukraine.

The maximum amount of gas Ukraine can get from Poland is 4 million cubic meters a day. However, “RWE has reiterated its readiness to increase gas supply to Ukraine as soon as transportation restrictions are lifted on the Slovak-Ukrainian border,” Naftogaz said.

The European Union has promised assistance to Ukraine in diversifying natural gas supplies.

Kiev is planning to buy about 290 million cubic meters of gas in Europe in reverse mode (about 140 million cubic meters will be delivered through Poland and the rest through Hungary).

Ukraine has been receiving natural in reverse flows from Europe since November 1, 2012. The gas is supplied across the Ukrainian border with Poland under a contract with from German RWE.

The gas is supplied across the Ukrainian border with Poland. RWE planned to supply up to 5 billion cubic meters of gas to Ukraine until May 2013. Last year Naftogaz imported 55 million cubic meters of gas using the reverse flow scheme.

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