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Ukraine to keep buying gas from Russian, European companies — Naftogaz CEO

November 18, 2014, 21:30 UTC+3

According to Andrey Kobolev, Ukraine will hold talks in two directions in line with the diversification strategy

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© ITAR-TASS/Alexander Baran

Infographics Gas agreement signed by Russia, Ukraine and the EU

Gas agreement signed by Russia, Ukraine and the EU

Gas agreement signed by Russia, Ukraine and the EU On October 31 Russia, Ukraine and the EU signed an agreement on gas supplies. Infographics by TASS
BRUSSELS, November 18. /TASS/. Ukraine plans to keep buying gas both from Russian state-controlled energy giant Gazprom and European companies, the head of Ukraine’s national oil and gas company Naftogaz, Andrey Kobolev, said Tuesday at an expert meeting on the European Union’s energy security in Brussels.

“In line with the diversification strategy, we will hold talks in two directions [with the EU and Russia], Kobolev said. “Yes, we would like to buy a certain volume from Gazprom if the price is fair.”

He said “many EU countries want to sell gas to Ukraine,” adding that now Ukraine has “four key suppliers, who, if their capabilities are used in full, account for supplies of about 1 billion cubic meters of gas a month from the EU to Ukraine.”

“If we are able to double the volume, Ukraine will be able to do without Russian gas forever,” Kobolev said. He said his country should “solve technical issues of reverse supplies from Slovakia.”

“In this case, Ukraine will be able to receive from the EU any volumes of gas it wants,” he said confidently.

Kobolev said that in line with Ukraine’s own strategy of gas supply diversification, Kiev does not want “to depend on one source for more than 30% of imports.”

He said Ukraine plans to start discussions of next summer’s prospective gas supplies with Russia and the European Union as soon as possible.

“This summer, it took us more than half a year to reach a very fragile agreement, so discussion of the ‘summer gas package’ should be launched as soon as possible. Ukraine is ready to start discussing the issue at any time,” Kobolev said. He said, however, that Russia and the EU are not ready to start the talks before January.

At three-party ministerial talks on October 31, Russia, the EU and Ukraine agreed the terms of gas deliveries for the period until the end of March 2015. Ukraine calls the agreement the “winter gas package”, saying the terms should differ from the “summer gas package”, when, due to higher temperatures, the gas prices should be higher.

In turn, Russia’s Gazprom has repeatedly said that a provisional agreement is in force now, and gas supply contracts cannot include different price terms for the winter and summer.

Kobolev also said Ukraine is inviting EU representatives to its gas measuring stations in winter to prove that it does not illegally tap transited gas.

“It is important to make sure that the 2009 gas crisis does not repeat this winter. We believe the best way to ensure stable supplies is to invite European Commission representatives to our gas measuring stations to monitor gas flows to Europe,” he said.

Kobolev said the volumes of gas Ukraine will buy from Russia depend on various circumstances.

“How much gas we will buy from Gazprom depends exclusively on the weather. The volume of gas we will buy from Russia may be from zero to five billion cubic meters, not more,” he said.

“Theoretically, we may not need Russian gas at all should the weather be warm and if Ukraine uses energy efficiency and economy measures,” Kobolev said.

“The key gas consumer in Ukraine is its population, which consumes gas directly, or using central heating. The annual consumption by these consumers totals some 25 billion cubic meters of gas. If it shrinks by 20%, we will need to import 5 billion cu m of gas less,” he said.

Infographics Russian gas in Europe

Russian gas in Europe

One-third of gas consumed in EU comes from Russia. Infographics ITAR-TASS
During their gas talks at the end of October, Russia, the EU and Ukraine agreed on resumption of Russian gas supplies to Ukrainian consumers, on guarantees of gas transit to the EU and partial repayment of Kiev’s gas debts.

Gazprom on June 16 switched Naftogaz to prepayment for gas supplies because Kiev failed to pay part of its gas debt by the deadline of 10:00 Moscow Time on June 16. Russian gas supplies to Ukraine for its own needs were halted, but transit volumes were reportedly passing via Ukraine to Europe in line with the schedule.

During the late October talks, Moscow agreed to grant Kiev a discount of $100 for 1,000 cubic meters of gas to the contract formula-stipulated price. Russian Energy Minister Alexander Novak said after the talks that the discount would be formalized by a Russian government resolution soon.

With the discount, the Russian gas price for Ukraine in the fourth quarter of 2014 will total $378 per 1,000 cu m, and $365 per 1,000 cu m in the first quarter of 2015. Ukrainian Energy Minister Yury Prodan said then Naftogaz plans to buy 4 billion cu m of gas from Gazprom by the end of the year.

The “take or pay” regime will be canceled for Ukraine from November 2014 to the end of March 2015, according to Novak; he also said the issue of gas supplies in the summer period had not been discussed at the talks in late October.

Gazprom’s share in European gas imports totals 60%, with half of it supplied via Ukrainian territory.

Russian President Vladimir Putin pledged October 17 that Russia will provide enough gas to Europe in winter.

In late 2008 - early 2009, a gas dispute between Moscow and Kiev saw Russia cut off gas supplies to Ukraine on January 1, 2009 over unpaid debts.

Gas deliveries to European consumers were affected because Ukraine apparently started siphoning off transited gas. The dispute was resolved on January 18, 2009 with a new gas contract.

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