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Absence of gas balancing agreement with Russia jeopardises gas transit to Europe

August 13, 2014, 22:15 UTC+3 KIEV
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KIEV, August 13, /ITAR-TASS/. The absence of a gas balancing agreement between Russia’s Gazprom and Naftogaz of Ukraine jeopardises gas transit to Europe, the Ukrainian company said on Wednesday.

“The termination by Russia on June 17 of the gas balancing agreement between Ukrtransgaz and Gazprom Export makes it impossible for Gazprom to use gas from Ukrainian gas storage facilities for meeting peak demand in the European Union,” Naftogaz of Ukraine said.

Gazprom said earlier that the gas balancing agreement between Gazprom Export and Ukrtransgaz had been used quite rarely, and the volumes it regulated had not exceeded several hundredths of a percentage of transit amounts and its termination would therefore not affect the reliability of gas supplies to Europe across Ukraine.

Gazprom also said it could not rely on the Ukrainian gas transportation system to meet peak demand next winter and would store more gas in European underground gas storage facilities this summer to this end.

Naftogaz of Ukraine, for its part, said the absence of direct interconnection agreements between Ukrtransgaz and transportation system operators in the neighbouring countries made standard gas transit balancing impossible.

Contrary to the EU regulations, Gazprom Export has such agreements and thus has full control over the transportation and sale of gas on Europe’s eastern border, the Ukrainian company said.

Naftogaz of Ukraine apparently would like to have such control itself by moving the gas sale point from Ukraine’s order with Europe to the Russian border.

It said earlier this week that if restrictions were imposed on Russian companies, gas could be transported to Europe by companies that had not been affected by the sanctions and had signed direct contracts with the Ukrainian gas producer.

Naftogaz of Ukraine is also planning to contract a European company for this purpose, but this cannot be done without Gazprom’s consent.

Prime Minister Arseny Yatsenyuk threatened to stop Russian gas transit across Ukraine as part of the sanctions against Moscow.

The statement raised concerns in Europe. The German energy concern RWE, one of the leading European partners of Russian Gazprom, said it was hoping that Naftogaz of Ukraine will continue the transit of gas to Europe.

Slovensky Plynarensky Priemysel (SPP), Slovenia’s gas importer, said it was watching the situation and considering it a priority to “ensure uninterrupted gas supplies to consumers”.

Another German company, E.ON, said it was hoping that the sanctions would not affect gas supplies from Russia.

“PGNiG is closely watching the situation and is ready to take necessary steps when the result [of Ukraine’s sanctions] becomes known,” the Polish gas importing company said.

Germany’s Wintershall said it was also watching the situation and “does not want to spread rumours about the sanctions being prepared and their possible consequences”.

It said any disruption of gas transit across Ukraine “will not affect trading operations of WINGAS and its consumers in Germany and Western Europe”.

WINGAS receives gas from the producers in the Northern Sea and Russia and less than 10% of it transported through Ukraine, with the bulk of it going by the Yamal-Europe pipelines via Belarus and Poland, and Nord Stream.

Wintershall said its underground gas storage facilities were also sufficiently filled and diversification of gas supply routes from Russia to Europe, including the construction of South Stream pipeline, would reduce transportation costs and ensure safe supplies to Europe.

Yatsenyuk also promised to seek the assistance of American and European partners in order to modernise the Ukrainian gas transportation system.

In June, Ukraine asked the European Union and the United States to help to upgrade its gas transportation system and then operate it. Kiev put the cost of the project at 3-5.3 billion U.S. dollars, which it said would secure gas transit to Europe in the amount of 145 billion cubic metres a year until 2030.

But Gazprom experts say that the modernisation of the Ukrainian gas transportation system can eventually cost 16 billion U.S. dollars.

The throughput capacity of the Ukrainian gas transportation is 288 billion cubic metres system at the entrance and 178.5 billion cubic meters at the exit, including 142.5 billion cubic metres to European countries and 3.5 billion cubic metres to Moldova. Natural gas transit through Ukraine to Europe and CIS countries in 2011 increased by 5.7% from 2010 to 104,197,067,000 cubic metres, including to Western Europe by 5.9% to 101,098,013,000 cubic metres, but decreased by 2.4% to 3,099,054,000 cubic metres to CIS countries.

Ukraine’s gas transportation system consists of 72 compressor stations, 110 production facilities and 1,451 gas distribution stations. The overall length of gas pipelines operated by the company is 38,600 kilometres, including 22,200 kilometres of trunk pipelines and 16,400 kilometres of extensions.

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