EU Energy Commissioner Günther Oettinger on Thursday asserted European companies' right to sell Russian gas back to Ukraine, flying in the face of warnings from Russian energy giant Gazprom as tensions continue to build over energy policy.
Energy companies in the EU have an "absolute right to dispose of gas bought from Gazprom at their discretion, including delivering it in reverse to Ukraine," Oettinger said via his spokeswoman Sabina Berger, ITAR-Tass reported.
Moscow cut off gas supplies to Kiev in mid-June when Ukraine failed to meet a deadline to pay a $1.95 billion gas debt, despite extensive negotiations leading up to the deadline. Gazprom said Thursday that gas flows to the EU were continuing as normal, Reuters reported.
Gazprom head Alexei Miller said last week that the state-owned gas monopoly could retaliate against European countries if they were to sell its gas back to Ukraine through large-scale reverse gas flows.
"If we detect a reverse flow on gas-measuring stations in Europe, we may impose restrictions," Miller said, ITAR-Tass reported.
President Vladimir Putin supported Miller's position on Tuesday, although unlike Miller, Putin said that Ukraine was already taking gas intended for the EU.
"In essence, [Ukraine] is getting our gas and they are paying one of our Western partners in Europe, who are not receiving these volumes," Putin said.
"We see everything, but are not taking any kind of action at the current moment so as not to aggravate the situation," he added.
Also on Thursday, Ukrainian gas company Naftogaz announced that 20 European companies, including the EU's largest gas traders, had bid to sell gas to Ukraine via Slovakia via so-called reverse flow.
"The extensive Ukrainian market is very interesting for Europeans," Naftogaz head Andrei Kobolev said, Prime reported.
In late April, Ukraine and Slovakia signed a reverse flow agreement that would make use of an old, unused pipeline to begin exporting 2 billion cubic meters, or bcm, to Kiev in October. Exports to Ukraine along this pipeline would rise to 8 bcm by early 2015.
Ukrainian energy officials have since proposed a plan to the EU Commission that would allow Ukraine to increase reverse flows via Slovakia to 30 bcm, Kommersant reported.
According to a UralSib report published Thursday, Gazprom would lose nearly $3 billion in 2016 if the EU accepted the proposal and began selling Russian gas back to Ukraine. The company would end up selling more gas to the EU — where prices range from $360 to $380 per thousand cubic meters and gas is subject to a 30 percent export duty — instead of Ukraine, where the price was previously set at $385 per thousand cubic meters, there is no export duty and transportation costs are lower.
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 Andrei Kobolev said on June 16.
The transit of gas to Europe depends on whether Ukraine’s underground storage facilities are filled sufficiently with at least 18.5 billion cubic meters of gas. According to the EU, there are 14 billion cubic meters of gas in the storage facilities now.
During mid June 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 according to Kobolev who added, “the price of European companies is lower than that offered Gazprom subject to a discount.”
Ukraine can count on annual 8 billion cubic meters of gas from Slovakia — EC 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 meters of gas in reverse-flow mode, and we will increase this volume,” 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 negotiating for some time 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 meters of natural gas from Hungary daily in reverse-flow mode,” the Ukrainian Ministry of Energy and Coal Industry said on June 15.
“Technically, the maximum amount of 4 million cubic meters 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 Yuri Prodan, reverse-flow supplies can reach 8 billion cubic meters by September 1, 2014, not by 2015. Gas will be supplied by the Vojany-Uzhgorod pipeline, not the transit pipeline.
Ukrainian Energy and Coal Industry Minister Yuri Prodan
He said Ukraine had earlier asked the EU to increase reverse-flow gas supplies to the country.
In June 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 also that such supplies by the Vojany-Uzhgorod pipeline would not require the Russian company’s agreement and would give Ukraine up to 10 billion cubic meters of a gas a year.
Oettinger believes that diversification of supplies will help to solve Ukraine’s gas problem in part. However, he estimated that 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 meters of natural gas a year,” Naftogaz 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 meters 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 said.
The European Union has promised assistance to Ukraine in diversifying natural gas supplies.
Kiev is planning to buy about 290 million cubic meters of gas in Europe in reverse mode (about 140 million cubic meters will be delivered through Poland and the rest through Hungary).
Ukraine has been receiving natural gas 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 meters of gas to Ukraine until May 2015. Last year Naftogaz imported 55 million cubic meters of gas using the reverse flow scheme.
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