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Experts say interruptions in gas transit via Ukraine likely from fall

June 16, 2014, 22:40 UTC+3 MOSCOW
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MOSCOW, June 16, /ITAR-TASS/. Germany’s largest oil and gas producer Wintershall does not expect complications during the summer with transit supplies of Russian gas to Europe via the territory of Ukraine, Wintershall Russia department head Mario Mehren said Monday.

“There are no risks with short-deliveries of gas in the summer: the demand is falling and there is enough gas in underground storage facilities. But in the second half of the year, demand for gas will grow and the 2009 situation might repeat,” Mehren told Itar-Tass.

A gas dispute between Moscow and Kiev in 2008-2009 saw Russia cut off gas supplies to Ukraine on January 1, 2009 over unpaid debts. Gas deliveries to European consumers were affected. The dispute was resolved on January 18, 2009 with a new gas contract.

Currently Ukraine’s gas storage facilities have 12.6 billion cubic meters of gas, according to data of the association of European underground gas storage facilities’ operators, Gas Storage Europe. Some 18.5 billion cu m is necessary to ensure uninterrupted transit.

European Energy Commissioner Guenther Oettinger said there could be a problem with EU provision with gas if Ukraine’s underground gas storages designed for European transit are not filled with gas by winter.

National Energy Industry Institute Director General Sergey Pravosudov said Ukrainian national oil and gas company Naftogaz Ukrainy may have difficulties in providing its own consumers with gas by fall, which could result in siphoning off of the transit gas for Ukraine’s own needs.

British Petroleum Group Chief Executive Robert Dudley does not expect interruptions in Russian gas supplies to Europe against the backdrop of a dispute between Russian state energy giant Gazprom and Naftogaz, Dudley said at the 21st World Petroleum Congress currently underway in Moscow.

Europe depends on Russian gas and Russia depends on European money, he explained.

Gazprom on Monday switched Naftogaz to prepayment for gas supplies because Ukraine failed to pay part of its gas debt by the deadline of 10:00 Moscow Time Monday.

Gas supplies to Ukraine were halted, but transit volumes are passing via Ukraine in line with the schedule. Measuring stations at the entrance to Ukraine and at the exit from the country register that European transit is proceeding normally.

Naftogaz’s past due debt for supplied Russian gas totals $4.458 billion: $1.451 billion for November-December 2013 and $3.007 billion for April-May 2014, Gazprom said in a statement earlier Monday.

The Russian energy giant on Monday filed a lawsuit with the Arbitration Institute of the Stockholm Chamber of Commerce. Gazprom says it should receive $4.5 billion in debt from Kiev due to Ukraine failing to properly fulfill its commitments on the January 19, 2009 contract and due to lack of payments for current deliveries.

The Ukrainian company plans to claim from Gazprom $6 billion of alleged overpayment for gas that Russia supplied to Naftogaz from 2010.

Currently Ukraine’s unpaid gas supplies are worth at $11.15 billion cubic meters.

During the latest three-party meeting in Brussels involving Russia, Ukraine and the EU, Gazprom agreed to a compromise: to receive payment from Naftogaz for April and May gas supplies at a price offered to Ukraine from June 1: $384.86 per 1,000 cubic meters. But Ukraine insists the price should be $326 per 1,000 cu m.

Russia recently substantially raised the gas price for Ukraine to $485.5 per 1,000 cubic meters, but Ukraine has insisted the price should be lowered to that of this year’s first quarter ($268.5 per 1,000 cu m).

Moscow raised the price for Kiev to $385.5 per 1,000 cu m in the second quarter of 2014 because Ukraine failed to fulfill its commitments under an additional agreement concluded in December 2013, which obliged the country to pay for supplied volumes of Russian gas in time.

Another raise to $485.5 per 1,000 cu m was due to the cancelation of the Kharkov Accords with Ukraine, which had been struck in 2010 and stipulated that Russia’s lease of naval facilities in Crimea [then part of Ukraine] would be extended by 25 years beyond 2017 - until 2042. The accords also envisioned a $100 discount.

Crimea refused to recognize the legitimacy of authorities who were propelled to power in Ukraine during a coup in February 2014. The peninsula held a referendum on March 16 and overwhelmingly voted to reunify with Russia, seceding from Ukraine after some 60 years as part of it. Putin signed the accession agreement on March 18.

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