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Hungary to increase reverse-flow gas supply to Ukraine

June 18, 2014, 23:21 UTC+3 KIEV
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 said
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KIEV, June 18. /ITAR-TASS/. Hungary has agreed to increase reverse-flow gas supply to Ukraine, the Ukrainian Ministry of Energy and Coal Industry said on Wednesday, June 18.

It said that during their working trip to Hungary, Energy and Coal Industry Minister Yuri Prodan and Naftogaz of Ukraine CEO Andrei Kobolev had held talks with Hungarian Minister of Trade and Foreign Affairs Tibor Navracsics and Minister of National Development Miklos Sesztak to discuss European energy security and cooperation in the energy sector between the two countries.

“The sides agreed it would be advisable to increase gas supply to Ukraine from Hungary”, the ministry said.

On May 15, Naftogaz of Ukraine said Ukraine had made a contract with one of the major European gas companies for reverse-flow gas supplies to Ukraine from Hungary. It did not give the name of the company or the details of the contract.

On June 16, Kobolev said “Ukraine has been offered cheap gas at a price below 350 U.S. dollars - 320 U.S. dollars [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.

According to 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 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.

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.

Gazprom said it might impose restrictions on European companies which supply gas to Ukraine using reverse-flow mechanisms.

“A reverse flow is a semi-fraudulent mechanism whereby gas runs in circles. But this is Russian gas,” Gazprom CEO Alexei Miller 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.

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