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Ukrainian delegation to go to Europe June 17 for reverse-flow gas supply talks

June 16, 2014, 21:52 UTC+3 KIEV
The European Union has offered reverse-flow gas supplies to Ukraine at a price lower than that of Russia’s Gazprom, Baftogaz CEO says
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Naftogaz CEO Andrei Kobolev

Naftogaz CEO Andrei Kobolev

© ITAR-TASS/Maksim Nikitin

KIEV, June 16. /ITAR-TASS/. A Ukrainian delegation will go Europe on June 17 for talks on reverse-flow gas supplies, Naftogaz of Ukraine CEO Andrei Kobolev said on Monday, June 16.

“Ukraine has been offered cheap gas at a price below $350 - $320 per 1,000 cubic metres. These are European companies that have the resource and are ready to supply it to Ukraine,” he said.

Kobolev said Ukraine was working on this with such companies as RWE and Gas de France. “There are proposals from other companies as well,” he added.

The European Union has offered reverse-flow gas supplies to Ukraine at a price lower than that of Russia’s Gazprom, Kobolev said.

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 metres of gas. According to the EU, there are almost 12 billion cubic metres of gas in the storage facilities now. Kobolev put it at nearly 14 billion cubic metres.

“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 metres of gas in reverse-flow mode, and we will increase this volume,” Kobolev said.

“The needs of Ukrainian consumers can be met with domestic production and the existing reserves in the underground gas storage facilities,” 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 metres 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 metres 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 Yuriy Prodan, reverse-flow supplies can reach 8 billion cubic metres 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 metres 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 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 Andrei Kobolev CEO of Ukraine's Naftogaz 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 metres of natural gas a year,” Naftogaz of Ukraine 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 metres 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 of Ukraine said.

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

Infographics Russian gas in Europe Russian gas in Europe
One-third of gas consumed in EU comes from Russia. Infographics ITAR-TASS
Kiev is planning to buy about 290 million cubic metres of gas in Europe in reverse mode (about 140 million cubic metres 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 metres of gas to Ukraine until May 2013. Last year Naftogaz Ukrainy imported 55 million cubic metres of gas using the reverse flow scheme.

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