KIEV, Ukraine -- Ukraine plans to sell bonds denominated in Russian rubles and doesn’t need to restart a $15.6 billion International Monetary Fund loan to make debt payments, said an adviser to President Viktor Yanukovych.
The former Soviet state wants to raise 98 billion hryvnia ($12 billion) this year, two thirds of which will probably be bought domestically, Iryna Akimova, the first deputy chief of Yanukovych’s staff, said in an interview yesterday.
The Finance Ministry has regularly sold bonds denominated dollars and euros in the domestic market after delaying a $1.5 billion Eurobond offering planned for March.
“The government has already made some successful attempts on the domestic market,” Akimova said in Washington.
“Now they’re working on government bonds denominated in rubles to use in the Russian market and there are rather good perspectives.”
Ukraine, whose IMF program was frozen last March after the government refused to raise domestic natural-gas prices to trim the budget deficit, faces 42.27 billion hryvnia ($5.19 billion) in foreign debt payments in 2012.
To bolster state coffers, it is negotiating with Russia to lower the price it pays for the fuel by a third, which would cut losses at state energy company NAK Naftogaz.
A rally in Ukraine’s dollar-denominated bonds due in 2021 cut yields 20 basis points, or 0.20 percentage point today, to 10.02 percent, compared with 10.49 percent on March 30, which was the highest in more than two months.
The cost of insuring Ukrainian government debt against non- payment for five years using credit-default swaps was 839 basis points yesterday, down from a two-month high of 857 on March 30, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.
A basis point is 0.01 percentage point.
Household gas prices are “a serious, serious issue” and tariffs “should come closer to the market-oriented level,” Akimova said, predicting some increases toward year-end.
“On what scale, we’ll see.”
Yanukovych’s Party of Regions, which has lost support in opinion polls, faces parliamentary elections in October.
Ukraine is seeking to pay about $250 per thousand cubic meters of Russian gas, compared with $416 last quarter, and wants to boost transit volumes through its pipelines to Europe after its neighbor began rerouting some supplies through the Nord Stream pipeline and via another link across Belarus.
In return, Russia is seeking a stake in Ukraine’s transit pipelines.
It also wants Yanukovych to sign up to a Customs Union it created with Belarus and Kazakhstan.
Ukraine has said joining the union would harm its chances of signing an Association Agreement, including a free-trade pact, with the European Union.
The policies used by Russia are aimed at applying “political pressure” on Ukraine, according to Akimova, who says the country opposes joining the Customs Union.
“Energy issues are always very politicized.”
The economy needs 27 billion cubic meters of gas in 2012, about half the 52 billion it’s contractually obliged to purchase, according to Akimova.
“The current gas agreement is unfair both in terms of price and volumes,” she said.
Ukraine is seeking to roll over a $2 billion loan from Russian lender VTB Group (VTBR) that matures in June, Akimova said, adding that the nation may seek further financing from other Russian banks.
Economic growth in Ukraine will probably slow to 3 percent this year, below a 3.9 percent government forecast, because of weaker global demand for exports such as steel, said Akimova, who’s in charge of economic programs and represents Yanukovych in the Cabinet.
Gross domestic product rose 5.2 percent in 2011.
Showing posts with label Energy. Show all posts
Showing posts with label Energy. Show all posts
Saturday, 7 April 2012
Sunday, 18 March 2012
Ukraine Agrees To Split Naftogaz
KIEV, Ukraine -- The Ukrainian government approved a bill on Friday to split the national energy company Naftogaz into production and transportation divisions and prohibit rental or privatization of the gas transportation system.
Naftogaz should be split according to the provisions of the EU Third Energy Package, which requires the separation of energy production, transportation and sales, as Ukraine is a member of the European Energy Communit, Ukrainian Deputy Minister of Energy and Mines Vladimir Makukha said.
Makukha claimed delay in reforming the country's gas sector had prevented modernization of the Ukrainian gas transportation system, and approval of the new bill could re-start the process.
"In fact, implementation of the first pilot project to upgrade Ukraine's gas transit system to modernize the Urengoi-Pomary-Uzhgorod gas pipeline with funds from European financial institutions has stopped," Makusha said.
Europe has refused to grant the funds until Ukraine reforms its internal gas market.
Naftogaz expected to get over $300 million from a consortium of international banks in July 2011 to upgrade the Urengoi-Pomary-Uzhgorod pipeline.
Kiev estimates the overall cost of upgrading the whole system at $5-7 billion over five to seven years.
The bill was opposed by the opposition in the Rada, particularly by supporters of former Prime Minister Yulia Tymoshenko, who tried to block the rostrum in protest as it was debated.
Ukraine's National Security and Defense Council head Andriy Klyuyev said the council will discuss how to manage the gas transportation system as the issue is a matter of the country's national security.
Russia had previously proposed setting up a joint venture between Naftogaz and Gazprom, to run Ukraine's gas transit system, as part of a settlement of its gas price dispute with Moscow.
The two countries have been embroiled in a long-running dispute over the price and volume of Russian gas purchased by Ukraine.
Kiev insists the current price is too high.
In late February Ukrainian Prime Minister Mykola Azarov said Moscow had sent a new gas proposal to Kiev stipulating a 10 percent discount in the price of gas, which Ukraine was considering.
Kiev imported over 1.8 billion cubic meters of Russian gas in January 2012, while in February it had to increase purchases to 3.1 billion cu m due to the severe cold.
The annual average Russian gas price for Ukraine for this year stands at $416 per 1,000 cu m.
Ukraine claims it would be cheaper to buy gas from Germany, and has begun exploring other sources of supply.
Naftogaz should be split according to the provisions of the EU Third Energy Package, which requires the separation of energy production, transportation and sales, as Ukraine is a member of the European Energy Communit, Ukrainian Deputy Minister of Energy and Mines Vladimir Makukha said.
Makukha claimed delay in reforming the country's gas sector had prevented modernization of the Ukrainian gas transportation system, and approval of the new bill could re-start the process.
"In fact, implementation of the first pilot project to upgrade Ukraine's gas transit system to modernize the Urengoi-Pomary-Uzhgorod gas pipeline with funds from European financial institutions has stopped," Makusha said.
Europe has refused to grant the funds until Ukraine reforms its internal gas market.
Naftogaz expected to get over $300 million from a consortium of international banks in July 2011 to upgrade the Urengoi-Pomary-Uzhgorod pipeline.
Kiev estimates the overall cost of upgrading the whole system at $5-7 billion over five to seven years.
The bill was opposed by the opposition in the Rada, particularly by supporters of former Prime Minister Yulia Tymoshenko, who tried to block the rostrum in protest as it was debated.
Ukraine's National Security and Defense Council head Andriy Klyuyev said the council will discuss how to manage the gas transportation system as the issue is a matter of the country's national security.
Russia had previously proposed setting up a joint venture between Naftogaz and Gazprom, to run Ukraine's gas transit system, as part of a settlement of its gas price dispute with Moscow.
The two countries have been embroiled in a long-running dispute over the price and volume of Russian gas purchased by Ukraine.
Kiev insists the current price is too high.
In late February Ukrainian Prime Minister Mykola Azarov said Moscow had sent a new gas proposal to Kiev stipulating a 10 percent discount in the price of gas, which Ukraine was considering.
Kiev imported over 1.8 billion cubic meters of Russian gas in January 2012, while in February it had to increase purchases to 3.1 billion cu m due to the severe cold.
The annual average Russian gas price for Ukraine for this year stands at $416 per 1,000 cu m.
Ukraine claims it would be cheaper to buy gas from Germany, and has begun exploring other sources of supply.
Tuesday, 17 January 2012
Ukrainians Seek Better Terms From Russia
KIEV, Ukraine -- Ukraine appears to have few good cards to play to secure a significant reduction in the price of its Russian gas imports as it readies for a resumption of crucial talks with Russia, Reuters reported on Monday, citing experts.
The ex-Soviet republic, which depends hugely on Russian gas supplies to power its heavy industries and heat homes, has sought for more than a year to renegotiate a 2009 deal with Moscow, which it says sets an exorbitant price for the fuel.
Talks have failed to produce any results.
Ukrainian officials are now more optimistic that a new round of negotiations, which open in Moscow on Tuesday, will be more successful.
But, with Russia under little pressure to review a lucrative 10-year contract, the big question is: what will the Kiev government concede in exchange for a reduction in price from the present $416 per 1,000 cubic meters to a hoped-for $250?
Moscow has long said a discount is possible only if Russian gas giant Gazprom gets a stake in the network.
But, with issues of national sovereignty at stake which the opposition could easily exploit, the Ukrainian leadership is saying the network is not for sale.
"The issue of (a pipeline network) sale has never been on the agenda. We dismissed it immediately," Energy Minister Yuriy Boyko told reporters on Jan. 13.
"If we find a model that satisfies both sides, we will make a deal. Otherwise we will work under the existing contract."
The Kiev government is also under pressure from the European Union with which it concluded talks late last year on an association agreement.
EU diplomats say EU Energy Commissioner Guenther Oettinger reminded Boyko last Friday by telephone that any final agreement with Russia had to be compatible with Ukraine's membership of the Energy Community Treaty and its other commitments on energy security.
These rule out sale of the network to Russia.
Kiev-based experts expect the Ukrainians to revive their offer of Russian participation in a consortium, also involving some European firms, to modernise the pipeline network.
But the Russian reaction has so far been lukewarm to the idea and EU diplomats say they are not aware of any European firm being approached by the Ukrainians to take part.
Some experts say that Russia's development of other export routes such as the Nord Stream pipeline to Germany means the Ukrainian transit system is rapidly losing its value as negotiating currency - an added pressure on Ukraine.
Gazprom chief executive Alexei Miller, a key player in the new round of talks, sought to drive this point home on Monday, remarking laconically to reporters:
"If, as we hear from Ukraine, the gas pipeline system is a historical treasure, then its place should be in a museum."
"The two sides seem doomed to reach an agreement at some stage. But the main question now is what concessions are the Ukrainians prepared to make. It is not clear what they have to play," said one EU diplomat.
Others doubt there will be any serious attempt by Moscow to solve the gas issue until after the Russian presidential election in March.
"There will be a consortium but not now - after March, after the Russian elections," Valentin Zemlyansky, an independent Ukrainian expert, said.
Experts expect much of the early discussion to turn on a demand by Ukraine to cut the volume of natural gas it is contracted to import this year.
Ukrainian authorities say they will insist on cutting imports to 27 billion cubic meters (bcm) this year from an estimated 40 bcm last year.
But Gazprom insists this level is too low according to the present contract.
The ex-Soviet republic, which depends hugely on Russian gas supplies to power its heavy industries and heat homes, has sought for more than a year to renegotiate a 2009 deal with Moscow, which it says sets an exorbitant price for the fuel.
Talks have failed to produce any results.
Ukrainian officials are now more optimistic that a new round of negotiations, which open in Moscow on Tuesday, will be more successful.
But, with Russia under little pressure to review a lucrative 10-year contract, the big question is: what will the Kiev government concede in exchange for a reduction in price from the present $416 per 1,000 cubic meters to a hoped-for $250?
Moscow has long said a discount is possible only if Russian gas giant Gazprom gets a stake in the network.
But, with issues of national sovereignty at stake which the opposition could easily exploit, the Ukrainian leadership is saying the network is not for sale.
"The issue of (a pipeline network) sale has never been on the agenda. We dismissed it immediately," Energy Minister Yuriy Boyko told reporters on Jan. 13.
"If we find a model that satisfies both sides, we will make a deal. Otherwise we will work under the existing contract."
The Kiev government is also under pressure from the European Union with which it concluded talks late last year on an association agreement.
EU diplomats say EU Energy Commissioner Guenther Oettinger reminded Boyko last Friday by telephone that any final agreement with Russia had to be compatible with Ukraine's membership of the Energy Community Treaty and its other commitments on energy security.
These rule out sale of the network to Russia.
Kiev-based experts expect the Ukrainians to revive their offer of Russian participation in a consortium, also involving some European firms, to modernise the pipeline network.
But the Russian reaction has so far been lukewarm to the idea and EU diplomats say they are not aware of any European firm being approached by the Ukrainians to take part.
Some experts say that Russia's development of other export routes such as the Nord Stream pipeline to Germany means the Ukrainian transit system is rapidly losing its value as negotiating currency - an added pressure on Ukraine.
Gazprom chief executive Alexei Miller, a key player in the new round of talks, sought to drive this point home on Monday, remarking laconically to reporters:
"If, as we hear from Ukraine, the gas pipeline system is a historical treasure, then its place should be in a museum."
"The two sides seem doomed to reach an agreement at some stage. But the main question now is what concessions are the Ukrainians prepared to make. It is not clear what they have to play," said one EU diplomat.
Others doubt there will be any serious attempt by Moscow to solve the gas issue until after the Russian presidential election in March.
"There will be a consortium but not now - after March, after the Russian elections," Valentin Zemlyansky, an independent Ukrainian expert, said.
Experts expect much of the early discussion to turn on a demand by Ukraine to cut the volume of natural gas it is contracted to import this year.
Ukrainian authorities say they will insist on cutting imports to 27 billion cubic meters (bcm) this year from an estimated 40 bcm last year.
But Gazprom insists this level is too low according to the present contract.
Ukraine Enters Final Russian Gas Push In Bid To Duck IMF Demands
KIEV Ukraine -- Ukraine is entering a final push in talks with Russia over cheaper natural-gas imports as it seeks to shore up state coffers without making the increases in household fuel costs needed to revive a $15.6 billion bailout
Ukraine must agree on a lower gas price with Russia within a month or bow to International Monetary Fund demands for a 30 percent jump in household tariffs for the fuel, Deputy Prime Minister Serhiy Tigipko said Jan. 11 amid signs tensions were rising in discussions between the two nations.
Energy and Coal Minister Yuriy Boyko meets officials in Moscow today for talks.
Ukraine’s government, which faces $8.2 billion in debt payments this year, wants to bolster public finances after the current-account deficit widened and reserves dwindled.
While raising household gas tariffs would reduce losses at state energy company NAK Naftogaz Ukrainy, higher heating costs may prove unpopular as President Viktor Yanukovych’s ruling party braces for elections in October.
“To get through the year, the government must agree on a lower gas price, sell assets or do a deal with the IMF,” Barbara Nestor, emerging-market strategist at Commerzbank AG in London, said Jan. 13.
“We expect market pressure to increase on Ukraine.”
Credit-default swaps to insure the country’s debt against non-payment for five years have jumped 63.27 basis points this year to 918.500 points on Jan. 13, the world’s biggest increase, according to data provider CMA.
Ukraine was granted its second IMF bailout in two years in July 2010.
Having disbursed $3.4 billion, the program was frozen last March after the government refused to raise household gas tariffs to trim a budget deficit the Washington-based lender estimates reached 3.5 percent of gross domestic product in 2011.
Instead, Ukraine wants to reduce the price it pays Russia for gas by a third to $250 per 1,000 cubic meters, President Viktor Yanukovych said Dec. 21.
Under the current contract, the price will rise to $416 per 1,000 cubic meters this quarter from $400 in the previous three months, Boyko said Jan. 13.
OAO Gazprom has sought to acquire Ukraine’s pipelines, which carry Russian gas to the European Union, in exchange for cheaper energy supplies, according to Boyko.
Belarus reduced its payments to Russia under a similar deal in November.
“Ukraine won’t consider selling its pipelines,” Boyko said.
“If we find a model that satisfies both sides, we’ll make a deal. Otherwise, we’ll work under the current contract.”
Ukraine’s economy grew about 5 percent in 2011, the fastest pace since 2007, helped by a good harvest and exports, Prime Minister Mykola Azarov said Jan. 11.
Growth may slow to 3.9 percent this year, the government forecasts.
The current-account deficit widened to $8.75 billion in the first 11 months of last year compared with $2.13 billion in the same period of 2011 because of increased gas imports and strong demand for foreign equipment, the central bank said Jan. 4.
Gold and foreign-exchange reserves shrank to $30.4 billion at the end of 2011 from $38.2 billion in August as the central bank supported the hryvnia.
The currency slid to 8.0435 per dollar yesterday, its lowest level in almost two years.
Without an IMF deal, “the government will have to continue depleting its limited foreign-currency reserves to meet its external debt obligations,” Liza Ermolenko, an emerging-markets economist at Capital Economics Ltd. in London, said Jan. 13 by e-mail.
“With over $50 billion in short-term external debt to be repaid this year by both the government and private sector and a hefty gas bill, this is hardly a sustainable strategy.”
Ukraine relies on Russia for more than 70 percent of its gas needs.
Should talks fail, it plans to cut 2012 imports to 27 billion cubic meters from 40 billion last year, Boyko said.
That would violate a contract signed after Russia cut gas supplies to Ukraine for almost three weeks in January 2009, disrupting deliveries to the EU amid freezing temperatures, Gazprom said Jan. 12.
Yanukovych says that deal is detrimental to its financial health.
A court in Kiev in October sentenced former Prime Minister Yulia Tymoshenko, who signed the contract with her Russian counterpart Vladimir Putin, to seven years in prison for abuse of office.
Ukraine may also be able to increase domestic gas and coal production and shift utilities to coal, saving 6 billion cubic meters of gas a year, according to Boyko.
The government has sufficient resources to sustain itself until the parliamentary elections without turning to the IMF or raising gas prices, according to Ivan Tchakarov, chief economist for Russia and the Commonwealth of Independent States at investment bank Renaissance Capital in Moscow.
“Irrespective of how the negotiations with Russia evolve, the Party of Regions is not yet in a sufficiently dire position to surrender to the IMF’s requirements,” he wrote yesterday in an e-mailed note.
“The government macroeconomic and budget framework is already based on the new high import gas price.”
Support for Yanukovych’s Party of Regions fell to 13.9 percent support in December from 16.6 percent three months earlier and 39.1 percent in April 2010, the Razumkov Center for Economic and Political Studies in Kiev said Dec. 27.
Backing for Tymoshenko’s party rose to 15.8 percent from 13.8 percent. The survey of 2,008 voting-age Ukrainians was conducted Dec. 9-16 and had a margin of error of 2.3 percentage points.
Yanukovych last week ruled out higher household gas prices.
While steps must be taken to address Ukraine’s financial position, selling the pipeline infrastructure may be preferable for the president as voters focus on their own fortunes.
“Economic growth won’t catch up with the gas-price increase,” Alexander Pecherytsyn, head of research at ING Groep NV in Kiev, said Jan. 13 by phone.
“Voters look at their pockets first of all. They don’t care about gas pipelines.”
Ukraine must agree on a lower gas price with Russia within a month or bow to International Monetary Fund demands for a 30 percent jump in household tariffs for the fuel, Deputy Prime Minister Serhiy Tigipko said Jan. 11 amid signs tensions were rising in discussions between the two nations.
Energy and Coal Minister Yuriy Boyko meets officials in Moscow today for talks.
Ukraine’s government, which faces $8.2 billion in debt payments this year, wants to bolster public finances after the current-account deficit widened and reserves dwindled.
While raising household gas tariffs would reduce losses at state energy company NAK Naftogaz Ukrainy, higher heating costs may prove unpopular as President Viktor Yanukovych’s ruling party braces for elections in October.
“To get through the year, the government must agree on a lower gas price, sell assets or do a deal with the IMF,” Barbara Nestor, emerging-market strategist at Commerzbank AG in London, said Jan. 13.
“We expect market pressure to increase on Ukraine.”
Credit-default swaps to insure the country’s debt against non-payment for five years have jumped 63.27 basis points this year to 918.500 points on Jan. 13, the world’s biggest increase, according to data provider CMA.
Ukraine was granted its second IMF bailout in two years in July 2010.
Having disbursed $3.4 billion, the program was frozen last March after the government refused to raise household gas tariffs to trim a budget deficit the Washington-based lender estimates reached 3.5 percent of gross domestic product in 2011.
Instead, Ukraine wants to reduce the price it pays Russia for gas by a third to $250 per 1,000 cubic meters, President Viktor Yanukovych said Dec. 21.
Under the current contract, the price will rise to $416 per 1,000 cubic meters this quarter from $400 in the previous three months, Boyko said Jan. 13.
OAO Gazprom has sought to acquire Ukraine’s pipelines, which carry Russian gas to the European Union, in exchange for cheaper energy supplies, according to Boyko.
Belarus reduced its payments to Russia under a similar deal in November.
“Ukraine won’t consider selling its pipelines,” Boyko said.
“If we find a model that satisfies both sides, we’ll make a deal. Otherwise, we’ll work under the current contract.”
Ukraine’s economy grew about 5 percent in 2011, the fastest pace since 2007, helped by a good harvest and exports, Prime Minister Mykola Azarov said Jan. 11.
Growth may slow to 3.9 percent this year, the government forecasts.
The current-account deficit widened to $8.75 billion in the first 11 months of last year compared with $2.13 billion in the same period of 2011 because of increased gas imports and strong demand for foreign equipment, the central bank said Jan. 4.
Gold and foreign-exchange reserves shrank to $30.4 billion at the end of 2011 from $38.2 billion in August as the central bank supported the hryvnia.
The currency slid to 8.0435 per dollar yesterday, its lowest level in almost two years.
Without an IMF deal, “the government will have to continue depleting its limited foreign-currency reserves to meet its external debt obligations,” Liza Ermolenko, an emerging-markets economist at Capital Economics Ltd. in London, said Jan. 13 by e-mail.
“With over $50 billion in short-term external debt to be repaid this year by both the government and private sector and a hefty gas bill, this is hardly a sustainable strategy.”
Ukraine relies on Russia for more than 70 percent of its gas needs.
Should talks fail, it plans to cut 2012 imports to 27 billion cubic meters from 40 billion last year, Boyko said.
That would violate a contract signed after Russia cut gas supplies to Ukraine for almost three weeks in January 2009, disrupting deliveries to the EU amid freezing temperatures, Gazprom said Jan. 12.
Yanukovych says that deal is detrimental to its financial health.
A court in Kiev in October sentenced former Prime Minister Yulia Tymoshenko, who signed the contract with her Russian counterpart Vladimir Putin, to seven years in prison for abuse of office.
Ukraine may also be able to increase domestic gas and coal production and shift utilities to coal, saving 6 billion cubic meters of gas a year, according to Boyko.
The government has sufficient resources to sustain itself until the parliamentary elections without turning to the IMF or raising gas prices, according to Ivan Tchakarov, chief economist for Russia and the Commonwealth of Independent States at investment bank Renaissance Capital in Moscow.
“Irrespective of how the negotiations with Russia evolve, the Party of Regions is not yet in a sufficiently dire position to surrender to the IMF’s requirements,” he wrote yesterday in an e-mailed note.
“The government macroeconomic and budget framework is already based on the new high import gas price.”
Support for Yanukovych’s Party of Regions fell to 13.9 percent support in December from 16.6 percent three months earlier and 39.1 percent in April 2010, the Razumkov Center for Economic and Political Studies in Kiev said Dec. 27.
Backing for Tymoshenko’s party rose to 15.8 percent from 13.8 percent. The survey of 2,008 voting-age Ukrainians was conducted Dec. 9-16 and had a margin of error of 2.3 percentage points.
Yanukovych last week ruled out higher household gas prices.
While steps must be taken to address Ukraine’s financial position, selling the pipeline infrastructure may be preferable for the president as voters focus on their own fortunes.
“Economic growth won’t catch up with the gas-price increase,” Alexander Pecherytsyn, head of research at ING Groep NV in Kiev, said Jan. 13 by phone.
“Voters look at their pockets first of all. They don’t care about gas pipelines.”
Saturday, 14 January 2012
Ukraine To Cut Russian Gas Imports By 50 Per Cent This Year
KIEV, Ukraine -- Ukraine will unilaterally reduce its imports of Russian natural gas by half during 2012, a senior government official said on Wednesday.
The former Soviet republic will consume some 27 billion cubic metres (bcm) of gas over the year, said Yury Boiko, Ukraine‘s Minister of Energy, at a Kiev press conference.
"We will be cutting our purchase of gas (from Russia) by half," he said, according to the Interfax news agency.
Responding to a question on how Ukraine could buy substantially less gas from Russia than contracted, Boiko said: "We will buy as much gas as our economy needs. If our (Russian) partners will have questions, they should resolve them in a civilised manner."
"There are issues that we have already agreed on (with Russia), and there are issues that are still not resolved," he said.
Ukraine imports approximately 60 per cent of its natural gas needs from Russia, making the country a major market for the Russian energy corporation Gazprom.
Gazprom chairman Aleksei Miller in a televised meeting with Russian President Dmitry Medvedev said his company considered the Ukrainian announcement and the potential reduced income worrying.
"Gazprom is concerned," Miller said. "The contracted volume is 52 bcm."
Miller in August appeared to signal Moscow‘s willingness to accept a limited reduction of gas Ukraine must buy from Russia, saying at the time he expected Kiev to purchase 33 bcm of natural gas in 2012, even if it is exceeds Ukrainian needs.
President Medvedev in the Wednesday meeting with Miller said Moscow would try to resolve the dispute with Ukraine by negotiations.
"We will behave in a civilised manner," Medvedev said. "And how else could the Russian side ever act?"
Kiev officials in recent months have repeatedly called for Gazprom to reduce the contracted price and volumes of gas sold Ukraine, citing the worldwide economic slowdown and falling domestic demand for gas.
Russian officials have said the price Ukraine pays for gas is fair, but that Moscow would be willing to renegotiate Ukraine‘s import contract if the Ukrainians agreed to sell portions of their natural gas transportation network to Russia.
Some two-thirds of all Russian gas sold in Europe travels to market via pipelines crossing Ukraine.
Kiev has long opposed the pipelines‘ sale to Gazprom, on grounds of national security.
Disputes between Ukraine and Russia over natural gas pricing and shipment terms have halted most Russian natural gas deliveries to Europe twice, in 2006 and 2009.
Both sides blamed each other for the stand-off.
Ukraine consumed some 54 billion bcm of gas from all sources in 2011, according to news reports.
The former Soviet republic will consume some 27 billion cubic metres (bcm) of gas over the year, said Yury Boiko, Ukraine‘s Minister of Energy, at a Kiev press conference.
"We will be cutting our purchase of gas (from Russia) by half," he said, according to the Interfax news agency.
Responding to a question on how Ukraine could buy substantially less gas from Russia than contracted, Boiko said: "We will buy as much gas as our economy needs. If our (Russian) partners will have questions, they should resolve them in a civilised manner."
"There are issues that we have already agreed on (with Russia), and there are issues that are still not resolved," he said.
Ukraine imports approximately 60 per cent of its natural gas needs from Russia, making the country a major market for the Russian energy corporation Gazprom.
Gazprom chairman Aleksei Miller in a televised meeting with Russian President Dmitry Medvedev said his company considered the Ukrainian announcement and the potential reduced income worrying.
"Gazprom is concerned," Miller said. "The contracted volume is 52 bcm."
Miller in August appeared to signal Moscow‘s willingness to accept a limited reduction of gas Ukraine must buy from Russia, saying at the time he expected Kiev to purchase 33 bcm of natural gas in 2012, even if it is exceeds Ukrainian needs.
President Medvedev in the Wednesday meeting with Miller said Moscow would try to resolve the dispute with Ukraine by negotiations.
"We will behave in a civilised manner," Medvedev said. "And how else could the Russian side ever act?"
Kiev officials in recent months have repeatedly called for Gazprom to reduce the contracted price and volumes of gas sold Ukraine, citing the worldwide economic slowdown and falling domestic demand for gas.
Russian officials have said the price Ukraine pays for gas is fair, but that Moscow would be willing to renegotiate Ukraine‘s import contract if the Ukrainians agreed to sell portions of their natural gas transportation network to Russia.
Some two-thirds of all Russian gas sold in Europe travels to market via pipelines crossing Ukraine.
Kiev has long opposed the pipelines‘ sale to Gazprom, on grounds of national security.
Disputes between Ukraine and Russia over natural gas pricing and shipment terms have halted most Russian natural gas deliveries to Europe twice, in 2006 and 2009.
Both sides blamed each other for the stand-off.
Ukraine consumed some 54 billion bcm of gas from all sources in 2011, according to news reports.
Russia Rejects Ukraine Plan To Cut Gas Import Volume
MOSCOW, Russia -- Russian company Gazprom on Thursday rejected Ukraine's demand to cut the volume of natural gas it has contracted to import this year, arousing concern about a potential conflict that could disrupt flows of Russian gas to Europe.
"The time for discussion on contract volumes in the new year has passed. And, unfortunately, we must remind our Ukrainian friends again that the terms of gas delivery are determined only by contract, and cannot be changed unilaterally by this or that letter," Gazprom spokesman Sergei Kupriyanov said in emailed comments.
Ukrainian state energy firm Naftogaz issued its own statement insisting it had the right to cut imports.
A debate between Moscow and Kiev over their gas trade relationship has grown increasingly shrill in recent weeks as a deal to cut the financial burden of Russian imports on Kiev has eluded them, driving renewed speculation about a possible gas war.
In the past, disputes between Moscow and Ukraine, across which pipelines take gas exports to Europe, have led to temporary cuts in supplies to the European Union, which is now seeking alternatives to reduce its dependence on Russian gas.
Then, the debate centred largely on price.
Now, Gazprom's Kupriyanov said, it is about volume.
"It seems our Ukrainian partners will not negotiate on the price level for gas in 2012. Apparently it suits them. They will try to agree on volumes for 2013 in the established contractual order," Kupriyanov said.
Ukraine has asked Gazprom to reduce the volumes of gas it sells to the former Soviet republic, whose gas bill last month amounted to $1 billion, an amount the fragile economy can ill afford.
Ukrainian authorities say they will insist on cutting Russian gas imports to 27 billion cubic metres (bcm) this year from an estimated 40 bcm last year.
But Gazprom, Russia's pipeline gas export monopoly, insists this level is too low.
"According to the contract, a change in annual volumes cannot exceed 20 percent. In 2012, as everyone knows, the contractual supply volume stands at 52 bcm and cannot be cut to 27 bcm even in theory," Gazprom spokesman Sergei Kupriyanov said.
POTENTIALLY PROBLEMATIC
Naftogaz, in turn, said in a statement it had asked Gazprom last May to reduce 2012 supplies to 33.75 bcm and could further reduce the volume by 20 percent, yielding the 27 bcm figure.
"Naftogaz states that it has warned Gazprom about cutting gas purchases in 2012 in a timely manner, that is six months before the start of the year, and fully in accordance with the terms of the contract," it said.
Petr Grishin, an analyst at Russian brokerage VTB Capital said in a note the dispute over volumes was "potentially problematic".
"...We saw the first signs that gas relations between Russia and Ukraine might again deteriorate beyond ordinary bargaining and inconsequential muscle flexing to something more material: disagreements over how much Ukraine owes Russia for current deliveries," Grishin said.
Russia and Ukraine have been engaged in months of negotiations on gas prices, which stand at $416 per thousand cubic metres in the first quarter of 2012, according to a Ukrainian government source.
Ukraine considers a fairer price to be $250.
The ownership of Ukraine's pipeline system, through which Russia used to ship 80 percent of its gas exports to Europe before the launch of the Nord Stream pipeline across the Baltic last November, is also a subject of talks.
"The time for discussion on contract volumes in the new year has passed. And, unfortunately, we must remind our Ukrainian friends again that the terms of gas delivery are determined only by contract, and cannot be changed unilaterally by this or that letter," Gazprom spokesman Sergei Kupriyanov said in emailed comments.
Ukrainian state energy firm Naftogaz issued its own statement insisting it had the right to cut imports.
A debate between Moscow and Kiev over their gas trade relationship has grown increasingly shrill in recent weeks as a deal to cut the financial burden of Russian imports on Kiev has eluded them, driving renewed speculation about a possible gas war.
In the past, disputes between Moscow and Ukraine, across which pipelines take gas exports to Europe, have led to temporary cuts in supplies to the European Union, which is now seeking alternatives to reduce its dependence on Russian gas.
Then, the debate centred largely on price.
Now, Gazprom's Kupriyanov said, it is about volume.
"It seems our Ukrainian partners will not negotiate on the price level for gas in 2012. Apparently it suits them. They will try to agree on volumes for 2013 in the established contractual order," Kupriyanov said.
Ukraine has asked Gazprom to reduce the volumes of gas it sells to the former Soviet republic, whose gas bill last month amounted to $1 billion, an amount the fragile economy can ill afford.
Ukrainian authorities say they will insist on cutting Russian gas imports to 27 billion cubic metres (bcm) this year from an estimated 40 bcm last year.
But Gazprom, Russia's pipeline gas export monopoly, insists this level is too low.
"According to the contract, a change in annual volumes cannot exceed 20 percent. In 2012, as everyone knows, the contractual supply volume stands at 52 bcm and cannot be cut to 27 bcm even in theory," Gazprom spokesman Sergei Kupriyanov said.
POTENTIALLY PROBLEMATIC
Naftogaz, in turn, said in a statement it had asked Gazprom last May to reduce 2012 supplies to 33.75 bcm and could further reduce the volume by 20 percent, yielding the 27 bcm figure.
"Naftogaz states that it has warned Gazprom about cutting gas purchases in 2012 in a timely manner, that is six months before the start of the year, and fully in accordance with the terms of the contract," it said.
Petr Grishin, an analyst at Russian brokerage VTB Capital said in a note the dispute over volumes was "potentially problematic".
"...We saw the first signs that gas relations between Russia and Ukraine might again deteriorate beyond ordinary bargaining and inconsequential muscle flexing to something more material: disagreements over how much Ukraine owes Russia for current deliveries," Grishin said.
Russia and Ukraine have been engaged in months of negotiations on gas prices, which stand at $416 per thousand cubic metres in the first quarter of 2012, according to a Ukrainian government source.
Ukraine considers a fairer price to be $250.
The ownership of Ukraine's pipeline system, through which Russia used to ship 80 percent of its gas exports to Europe before the launch of the Nord Stream pipeline across the Baltic last November, is also a subject of talks.
Saturday, 7 January 2012
The East-To-West Pipeline Game
The early opening of the Nord Stream pipeline is the latest gambit in the geopolitical chess match between Russia and Europe.
Pipelines connect the energy rich with the energy poor, essentially tying them together forever and in the process giving the transited lands a crucial role to play.
In the gas pipeline game being played by Russia, the former Soviet satellite states and Europe, everyone appears set on upping the stakes this winter.
Which explains why the ubiquitous Vladimir Putin, the Russian Prime Minister and, as now announced, the certain, again, next President of Russia, officiated on September 6 as the Nord Stream pipeline started pumping “technical gas” (necessary to build pressure) in advance of pumping gas directly from Russia to its German destination via a route that bypasses troublesome former Soviet states like the Ukraine.
The pipeline achieved this feat by being laid offshore and traversing the Baltic Sea.
It is hardly surprising that the Russian premier should take such interest in the project given the fact that foreign gas sales account for about 20 percent of the country’s income.
In Russia, as Steve LeVine noted in Foreign Policy, “control of the flow of hydrocarbons means raw power.”
With Putin, as we have written in From Soviet to Putin and Back, power is the seminal quality.
With European gas consumption expected to grow by a further 50 percent over the next decade, it is set to remain a highly lucrative market for Russia’s most important export and a necessary element of the very real goal coveted by that country: control over Europe.
The early opening of Nord Stream was surprising, and it represents the latest throw of the dice in the pipeline game.
Running under the Baltic past Finland, Sweden and Denmark, Nord Stream achieves two goals in just one play.
First, it eliminates any chance of a repeat of previous years’ interruptions in gas supply to Europe, the result of ongoing market skirmishes between Russia and one of the transit countries – Ukraine.
And, at the same time, the opening of Nord Stream leaves Ukraine – a country without significant energy reserves of its own – even more vulnerable to having its gas supplies cut off this winter.
A spat over prices and an outstanding bill have already seen the Ukrainian government threatening unspecified “consequences” if Russia’s gas prices aren’t lowered.
Alyona Getmanchuk, Director of Kiev’s World Policy Institute, has complained about Gazprom’s policy that ties its contract gas prices to the world oil price.
Given that the impact of U.S. shale gas is keeping gas prices down, Getmanchuk wants to sever the link between world gas and oil prices, much as companies in Germany and Italy are trying to do.
The partnership between Russia’s Gazprom and Germany’s E.ON and BASF-Wintershall anticipates that the 1,220-kilometer Nord Stream pipeline will deliver up to 55 billion cubic meters (just about 2 Tcf) of gas per year to Europe when it reaches capacity in 2013.
This is a sizeable chunk of Russia’s current total exports to both Eastern and Western Europe of 4.5 Tcf.
In a pre-launch television address, Putin spelled out how it would also offer Russia a freer “local” hand in future negotiations, stating, “Gradually, in a calmer manner we are departing from the diktat of the transit states” – a dark allusion to dealings with the Ukraine, in particular.
Not that Ukraine is about to repeat the mistakes of 2006 and 2009.
Talks between Kiev and Moscow may be currently deadlocked, but Ukraine’s President Victor Yanukovych has already rebuffed both an offer to join the Russian-dominated Customs Union and a Gazprom-dangled carrot of an $8 billion discount on its outstanding invoice, the latter amounting to an effective buyout of the Ukrainian national oil and gas company, Naftohaz Ukrainy.
Instead, Yanukovych has threatened to take Russia to “international arbitration” over the terms of its contractual agreement with Gazprom while, at the same time, resuming attempts to buy direct from gas-rich neighbor Turkmenistan, as it did in 2003.
But the plain fact is, in an energy-starved country, Ukraine may not have a lot of choices and could well be facing yet another cold winter of discontent over gas imports from Russia.
And the tangled web of Eurasian pipeline politics doesn’t stop there.
Europe, Nabucco & South Stream
While the EU will no doubt welcome its states avoiding being caught up in the spat between former Soviet allies, an online Nord Stream creates as many political problems as it solves.
Within days of the Nord Stream launch, Russia was back-slamming the EU over its offer to broker talks between energy-rich Azerbaijan and Turkmenistan – which, traditionally, have not enjoyed good relations – with the aim of constructing a trans-Caspian pipeline supplying Turkmen gas to the gas-starved EU-backed southern corridor Nabucco project.
A Caspian-Nabucco pipeline link-up would not only bypass Russian territory but would fulfill Europe’s strategy of diversifying away from its current reliance on Russian gas imports.
Nabucco is thus the chief rival to the other Russian-backed southern corridor pipeline, South Stream, which would provide a direct link with southern Europe via the Black Sea.
South Stream could be pumping gas before 2017 – ahead of Nabucco and precisely why, in May 2011, a Russian Gazprom-led “charm offensive” saw all of South Stream’s operators, including representatives from Germany’s BASF and Italy’s ENI, wining and dining EU Energy Commissioner Günther Oettinger in Brussels.
Leaving aside the murky geopolitics that sees German and Italian companies effectively co-operating in undermining the EU-backed Nabucco project, South Stream could still fall afoul of EU rules that would force Gazprom to open South Stream to independent suppliers.
That’s something Gazprom would be loath to do.
Meanwhile, there is also an intriguing sub-plot for European geopolitics.
While Nord Stream diminished any immediate concerns over gas supply interruptions as a result of tensions between Russia and its former satellite states, the EU energy minister currently wants European governments to give him a mandate to speak with “one voice,” not only in negotiations over the Caspian pipeline link for Nabucco but also its political corollary – the power to block individual EU states from cutting bilateral energy deals without close scrutiny by Brussels.
But a mandate effectively devolving power over national energy security matters to Brussels is likely to test the resolve of leaders in most European capitals, especially Berlin.
A Tangled Geopolitical Web
The Russo-German “special relationship,” as we have noted elsewhere, remains the Grand Narrative underlying Eurasian pipeline politics.
And that means two things.
First, Russia will hold the strong regional hand for years to come.
And second, Germany, for all its EU rhetoric, will, as the involvement of its national companies and former leaders with the Russian-backed Nord and South Stream pipelines reveals, continue to undermine the attainment of a “one voice” EU energy policy.
Moreover, these words concluding our year-ago article, “Turkmen Gas: ‘Anywhere but Europe,’ Urges Russia,” may seem, in light of recent developments, ominously prescient for Caspian geopolitics generally:
A Kremlin security document, approved by President Dmitry Medvedev and published by the Russian Security Council in May 2009 has already sanctioned the use of military force to protect Russia’s post-Soviet return to “energy superpower” status, specifically citing the Caspian as an area of potential conflict.
The invasion of Georgia in 2006 – does anyone really think it was all about South Ossetia? – is powerful testimony that Russia’s foreign policy “tank” is still fuelled by oil, or gas.
Pipelines connect the energy rich with the energy poor, essentially tying them together forever and in the process giving the transited lands a crucial role to play.
In the gas pipeline game being played by Russia, the former Soviet satellite states and Europe, everyone appears set on upping the stakes this winter.
Which explains why the ubiquitous Vladimir Putin, the Russian Prime Minister and, as now announced, the certain, again, next President of Russia, officiated on September 6 as the Nord Stream pipeline started pumping “technical gas” (necessary to build pressure) in advance of pumping gas directly from Russia to its German destination via a route that bypasses troublesome former Soviet states like the Ukraine.
The pipeline achieved this feat by being laid offshore and traversing the Baltic Sea.
It is hardly surprising that the Russian premier should take such interest in the project given the fact that foreign gas sales account for about 20 percent of the country’s income.
In Russia, as Steve LeVine noted in Foreign Policy, “control of the flow of hydrocarbons means raw power.”
With Putin, as we have written in From Soviet to Putin and Back, power is the seminal quality.
With European gas consumption expected to grow by a further 50 percent over the next decade, it is set to remain a highly lucrative market for Russia’s most important export and a necessary element of the very real goal coveted by that country: control over Europe.
The early opening of Nord Stream was surprising, and it represents the latest throw of the dice in the pipeline game.
Running under the Baltic past Finland, Sweden and Denmark, Nord Stream achieves two goals in just one play.
First, it eliminates any chance of a repeat of previous years’ interruptions in gas supply to Europe, the result of ongoing market skirmishes between Russia and one of the transit countries – Ukraine.
And, at the same time, the opening of Nord Stream leaves Ukraine – a country without significant energy reserves of its own – even more vulnerable to having its gas supplies cut off this winter.
A spat over prices and an outstanding bill have already seen the Ukrainian government threatening unspecified “consequences” if Russia’s gas prices aren’t lowered.
Alyona Getmanchuk, Director of Kiev’s World Policy Institute, has complained about Gazprom’s policy that ties its contract gas prices to the world oil price.
Given that the impact of U.S. shale gas is keeping gas prices down, Getmanchuk wants to sever the link between world gas and oil prices, much as companies in Germany and Italy are trying to do.
The partnership between Russia’s Gazprom and Germany’s E.ON and BASF-Wintershall anticipates that the 1,220-kilometer Nord Stream pipeline will deliver up to 55 billion cubic meters (just about 2 Tcf) of gas per year to Europe when it reaches capacity in 2013.
This is a sizeable chunk of Russia’s current total exports to both Eastern and Western Europe of 4.5 Tcf.
In a pre-launch television address, Putin spelled out how it would also offer Russia a freer “local” hand in future negotiations, stating, “Gradually, in a calmer manner we are departing from the diktat of the transit states” – a dark allusion to dealings with the Ukraine, in particular.
Not that Ukraine is about to repeat the mistakes of 2006 and 2009.
Talks between Kiev and Moscow may be currently deadlocked, but Ukraine’s President Victor Yanukovych has already rebuffed both an offer to join the Russian-dominated Customs Union and a Gazprom-dangled carrot of an $8 billion discount on its outstanding invoice, the latter amounting to an effective buyout of the Ukrainian national oil and gas company, Naftohaz Ukrainy.
Instead, Yanukovych has threatened to take Russia to “international arbitration” over the terms of its contractual agreement with Gazprom while, at the same time, resuming attempts to buy direct from gas-rich neighbor Turkmenistan, as it did in 2003.
But the plain fact is, in an energy-starved country, Ukraine may not have a lot of choices and could well be facing yet another cold winter of discontent over gas imports from Russia.
And the tangled web of Eurasian pipeline politics doesn’t stop there.
Europe, Nabucco & South Stream
While the EU will no doubt welcome its states avoiding being caught up in the spat between former Soviet allies, an online Nord Stream creates as many political problems as it solves.
Within days of the Nord Stream launch, Russia was back-slamming the EU over its offer to broker talks between energy-rich Azerbaijan and Turkmenistan – which, traditionally, have not enjoyed good relations – with the aim of constructing a trans-Caspian pipeline supplying Turkmen gas to the gas-starved EU-backed southern corridor Nabucco project.
A Caspian-Nabucco pipeline link-up would not only bypass Russian territory but would fulfill Europe’s strategy of diversifying away from its current reliance on Russian gas imports.
Nabucco is thus the chief rival to the other Russian-backed southern corridor pipeline, South Stream, which would provide a direct link with southern Europe via the Black Sea.
South Stream could be pumping gas before 2017 – ahead of Nabucco and precisely why, in May 2011, a Russian Gazprom-led “charm offensive” saw all of South Stream’s operators, including representatives from Germany’s BASF and Italy’s ENI, wining and dining EU Energy Commissioner Günther Oettinger in Brussels.
Leaving aside the murky geopolitics that sees German and Italian companies effectively co-operating in undermining the EU-backed Nabucco project, South Stream could still fall afoul of EU rules that would force Gazprom to open South Stream to independent suppliers.
That’s something Gazprom would be loath to do.
Meanwhile, there is also an intriguing sub-plot for European geopolitics.
While Nord Stream diminished any immediate concerns over gas supply interruptions as a result of tensions between Russia and its former satellite states, the EU energy minister currently wants European governments to give him a mandate to speak with “one voice,” not only in negotiations over the Caspian pipeline link for Nabucco but also its political corollary – the power to block individual EU states from cutting bilateral energy deals without close scrutiny by Brussels.
But a mandate effectively devolving power over national energy security matters to Brussels is likely to test the resolve of leaders in most European capitals, especially Berlin.
A Tangled Geopolitical Web
The Russo-German “special relationship,” as we have noted elsewhere, remains the Grand Narrative underlying Eurasian pipeline politics.
And that means two things.
First, Russia will hold the strong regional hand for years to come.
And second, Germany, for all its EU rhetoric, will, as the involvement of its national companies and former leaders with the Russian-backed Nord and South Stream pipelines reveals, continue to undermine the attainment of a “one voice” EU energy policy.
Moreover, these words concluding our year-ago article, “Turkmen Gas: ‘Anywhere but Europe,’ Urges Russia,” may seem, in light of recent developments, ominously prescient for Caspian geopolitics generally:
A Kremlin security document, approved by President Dmitry Medvedev and published by the Russian Security Council in May 2009 has already sanctioned the use of military force to protect Russia’s post-Soviet return to “energy superpower” status, specifically citing the Caspian as an area of potential conflict.
The invasion of Georgia in 2006 – does anyone really think it was all about South Ossetia? – is powerful testimony that Russia’s foreign policy “tank” is still fuelled by oil, or gas.
Sunday, 1 January 2012
Ukraine Gas Transit System Price To Fall Severely In 2012 - Miller
MOSCOW, Russia -- Ukraine's gas transit system that Kiev presently estimates to cost $20 billion may become significantly cheaper, the head of Russia's gas giant, Gazprom, Alexei Miller, said on Saturday.
During a meeting on Friday with Russian Prime Minister Vladimir Putin, Miller said that Ukraine had placed the price of its gas transit system at $20 billion and requested an annual $9-billion cut in the price of gas if Moscow and Kiev created a gas transport consortium.
"I don't exclude that Ukraine's so-called last strategic resource, its gas transit system, will severly fall in price next year," Miller told journalists on Saturday in regard to perspective talks with Ukraine in 2012 on the price of gas.
Miller called Ukraine's going price for the gas transit system "significant" taking into account that much money would be needed to invest in the transit system's modernization.
He said modernization of the system would be 2-8 billion euros ($2.6-$10.4 billion).
Ukraine earlier had set its price for the gas transit system much higher at $150-270 billion.
In June 2011, former Prime Minister Yulia Tymoshenko, who is presently serving a seven-year prison sentence for abuse of power in signing a gas deal with Russia, set the price of the system at $150 billion, and then in September this year said it was worth $270 billion.
Previous to Tymoshenko's statements in court on the price, Ukraine had place the system at $80-120 billion.
During a meeting on Friday with Russian Prime Minister Vladimir Putin, Miller said that Ukraine had placed the price of its gas transit system at $20 billion and requested an annual $9-billion cut in the price of gas if Moscow and Kiev created a gas transport consortium.
"I don't exclude that Ukraine's so-called last strategic resource, its gas transit system, will severly fall in price next year," Miller told journalists on Saturday in regard to perspective talks with Ukraine in 2012 on the price of gas.
Miller called Ukraine's going price for the gas transit system "significant" taking into account that much money would be needed to invest in the transit system's modernization.
He said modernization of the system would be 2-8 billion euros ($2.6-$10.4 billion).
Ukraine earlier had set its price for the gas transit system much higher at $150-270 billion.
In June 2011, former Prime Minister Yulia Tymoshenko, who is presently serving a seven-year prison sentence for abuse of power in signing a gas deal with Russia, set the price of the system at $150 billion, and then in September this year said it was worth $270 billion.
Previous to Tymoshenko's statements in court on the price, Ukraine had place the system at $80-120 billion.
Saturday, 12 November 2011
$4.8 billion needed to modernize gas transit pipelines
Experts from Mott MacDonald consulting company have considered the level of competence of Ukrtransgaz specialists (a subsidiary of Naftogaz Ukrainy, which services the gas transportation system) to be high, according to the Web site of the Dzerkalo Tyzhnia Ukraine newspaper.
"According to Mott MacDonald, taking into account the repairs of trunk gas pipelines, compressor stations and the installation of new gas metering units, as well as a modern system to manage the gas transportation system (GTS), its reconstruction and modernization will cost Ukrtransgaz (Naftogaz Ukrainy and consequently gas consumers in the country) at least $4.8 billion for seven years," reads the article on the ZN.UA portal.
The article notes that the priority is relatively inexpensive repairs, which will allow to keep the Ukrainian gas transportation system in a good working condition until it is fully modernized.
"To do this, Mott MacDonald recommends that at least $2.8 billion be invested in mini projects within the next eight or ten years. These costs are necessary to keep the system running. Simply speaking, this sum reflects a lack of funding during many years," reads the article.
"According to Mott MacDonald, taking into account the repairs of trunk gas pipelines, compressor stations and the installation of new gas metering units, as well as a modern system to manage the gas transportation system (GTS), its reconstruction and modernization will cost Ukrtransgaz (Naftogaz Ukrainy and consequently gas consumers in the country) at least $4.8 billion for seven years," reads the article on the ZN.UA portal.
The article notes that the priority is relatively inexpensive repairs, which will allow to keep the Ukrainian gas transportation system in a good working condition until it is fully modernized.
"To do this, Mott MacDonald recommends that at least $2.8 billion be invested in mini projects within the next eight or ten years. These costs are necessary to keep the system running. Simply speaking, this sum reflects a lack of funding during many years," reads the article.
Thursday, 10 November 2011
Ukraine Pays $1 Billion For Russian Gas Imports In October
KIEV, Ukraine -- Ukraine's national energy company Naftogaz Ukrayiny on Monday paid $1.004 billion to Russia's gas giant Gazprom for natural gas imported in October, the company said Wednesday.
"Naftogaz every month in full and on time fulfills commitments to Gazprom on payment for the supplied natural gas," the company said in a statement.
Naftogaz needs to make monthly payments to Gazprom within the first week of the following month to comply with a gas agreement both signed in January 2009.
Failure to pay on time for gas imports may provoke Gazprom to suspend gas supplies to Ukraine that may in turn affect other countries in Europe.
Ukraine has been trying for months to renegotiate its current gas deal with Russia, seeking a lower price. But the talks have so far failed to yield any tangible results.
Ukraine is buying Russian gas at about $401/1,000 cu m in the fourth quarter of 2011, compared with $355/1,000 cu m in Q3, $297/1,000 cu m in Q2 and $263/1,000 cu m in Q1, according to Naftogaz.
The gas prices include a discount of $100/1,000 cu m, obtained in April 2010 for extending of the stationing of Russian navy in Crimea by 25 years.
Naftogaz paid $487 million to Gazprom in September for natural gas imported in August, compared with $477 million paid in August for gas imported in July.
Meanwhile, Ukraine plans to switch to Russian rubles away from US dollars in paying for Russian gas imports, the National Bank of Ukraine reported earlier this month following negotiations in Moscow.
The NBU reported that the switching to rubles from dollars would allow Ukraine to ease mounting pressure on the local currency, the hryvnia, which has been suffering from widening current account deficit this year.
But the report triggered an outcry from opposition figures that said the move may weaken Ukraine's independence by forcing the central bank to accumulate part of its foreign exchange reserves in rubles, a volatile currency.
"The ruble is not a currency that is converted on international forex markets. The ruble can be purchased in the Russian Federation," Viktor Pynzenyk, a former finance minister, told Liberty Radio. "This means that the central bank must keep part of its reserves in rubles."
Ukraine plans to import a total of 40 billion cu m of gas from Russia in 2011, up from 36.5 Bcm imported in 2010, according to Naftogaz.
Naftogaz needs to make monthly payments to Gazprom within the first week of the following month to comply with a gas agreement both signed in January 2009.
Failure to pay on time for gas imports may provoke Gazprom to suspend gas supplies to Ukraine that may in turn affect other countries in Europe.
Ukraine has been trying for months to renegotiate its current gas deal with Russia, seeking a lower price. But the talks have so far failed to yield any tangible results.
Ukraine is buying Russian gas at about $401/1,000 cu m in the fourth quarter of 2011, compared with $355/1,000 cu m in Q3, $297/1,000 cu m in Q2 and $263/1,000 cu m in Q1, according to Naftogaz.
The gas prices include a discount of $100/1,000 cu m, obtained in April 2010 for extending of the stationing of Russian navy in Crimea by 25 years.
Naftogaz paid $487 million to Gazprom in September for natural gas imported in August, compared with $477 million paid in August for gas imported in July.
Meanwhile, Ukraine plans to switch to Russian rubles away from US dollars in paying for Russian gas imports, the National Bank of Ukraine reported earlier this month following negotiations in Moscow.
The NBU reported that the switching to rubles from dollars would allow Ukraine to ease mounting pressure on the local currency, the hryvnia, which has been suffering from widening current account deficit this year.
But the report triggered an outcry from opposition figures that said the move may weaken Ukraine's independence by forcing the central bank to accumulate part of its foreign exchange reserves in rubles, a volatile currency.
"The ruble is not a currency that is converted on international forex markets. The ruble can be purchased in the Russian Federation," Viktor Pynzenyk, a former finance minister, told Liberty Radio. "This means that the central bank must keep part of its reserves in rubles."
Ukraine plans to import a total of 40 billion cu m of gas from Russia in 2011, up from 36.5 Bcm imported in 2010, according to Naftogaz.
Sunday, 9 October 2011
Most Ukrainians Consider Prices For Russian Gas Unfair - Poll
KIEV, Ukraine -- Over 60 percent of Ukrainian people consider Kiev buys overpriced Russian gas, Ukraine's Reiting sociological company said in its public opinion poll on Saturday.
"Only 13 percent of respondents consider price as a market one, 1 percent thinks that the price is lower than market one, while 26 percent have not given a concrete answer," the company said in a statement, adding that 56 percent of respondents were sure Ukraine should strive for lower gas prices without any concessions.
Ukraine is seeking to review gas deals with Russia, saying the 2009 contract's gas price formula is unfair. Former prime minister Yulia Tymoshenko is now on trial for signing it.
Moscow has tied the price for gas to the international spot price for oil, which have risen strongly since due to the instability in the Middle East.
Ukrainian Prime Minister Mykola Azarov has said Ukraine was ready for compromises.
Ukraine's Deputy Prime Minister Boris Kolesnikov said late on Friday that country's damage from 2009 gas deals with Russia might stand at $80 billion.
"Tymoshenko signed a contract for $40 billion cubic meters of gas per year. It is a $200 more expensive price than for Germany and core Ukrainian competitors in Europe."
"In other words the Ukrainian industry and people pay $8 billion more every year. Ukraine's loss will be $80 billion for 10 years under the contract," Kolesnikov told Ukraine's Inter TV channel.
In late September Ukrainian President Viktor Yanukovich and Russian authorities held gas talks in Moscow, after which the Russian president's press service said that considerable progress had been reached during the negotiations.
Ukraine is seeking to review gas deals with Russia, saying the 2009 contract's gas price formula is unfair. Former prime minister Yulia Tymoshenko is now on trial for signing it.
Moscow has tied the price for gas to the international spot price for oil, which have risen strongly since due to the instability in the Middle East.
Ukrainian Prime Minister Mykola Azarov has said Ukraine was ready for compromises.
Ukraine's Deputy Prime Minister Boris Kolesnikov said late on Friday that country's damage from 2009 gas deals with Russia might stand at $80 billion.
"Tymoshenko signed a contract for $40 billion cubic meters of gas per year. It is a $200 more expensive price than for Germany and core Ukrainian competitors in Europe."
"In other words the Ukrainian industry and people pay $8 billion more every year. Ukraine's loss will be $80 billion for 10 years under the contract," Kolesnikov told Ukraine's Inter TV channel.
In late September Ukrainian President Viktor Yanukovich and Russian authorities held gas talks in Moscow, after which the Russian president's press service said that considerable progress had been reached during the negotiations.
Monday, 26 September 2011
Russia, Ukraine Leaders Tackle Gas Row
MOSCOW, Russia -- Russia's ruling tandem of Vladimir Putin and Dmitry Medvedev held rare joint talks Saturday with the visiting leader of Ukraine over the two sides' festering energy row.
The meeting with Ukrainian President Viktor Yanukovych at the Russian government's Zavidovo hunting estate came just hours after Medvedev had dramatically asked Putin to take over the presidency from him in March polls.
The three men were shown strolling together in a park in their black autumn jackets and looking down from a scenic pond bridge before returning to the lodge for more talks.
"We have already managed to resolve lots of problems, and I am sure that we will take the right and constructive approach here as well," Yanukovych told Medvedev in televised opening remarks.
"I accepted your invitation and came here to be at your side on this symbolic day for Russia and for Ukraine as well, I am sure," the Ukrainian leader added in reference to the planned handover of power to Putin.
The political drama in Moscow overshadowed a visit whose importance escalated sharply with Ukraine's announcement last month that it was ready to take its neighbour to an international court over gas.
Ukraine currently serves as Europe's main link to Russia's natural gas supplies and a previous dispute over prices led to a cut-off that lasted three weeks in January 2009.
Russia has been gradually raising the price it charges the former Soviet republics for gas after spending more than a decade subsidising deliveries in exchange for friendlier relations.
Ukraine says it should be paying a price closer to $230 per 1,000 cubic metres than the approximately $400 it will be charged at the turn of the year.
The Kommersant business daily said Ukraine was preparing to lift the price it charges for Russia's gas transits to EU nations if no agreement is reached -- a move certain to anger Moscow.
Kiev has also vowed to take Moscow to an arbitration court in Brussels and refused to join a Russian-led customs union that Medvedev has set out as one of the conditions for a lower gas price.
The three men were shown strolling together in a park in their black autumn jackets and looking down from a scenic pond bridge before returning to the lodge for more talks.
"We have already managed to resolve lots of problems, and I am sure that we will take the right and constructive approach here as well," Yanukovych told Medvedev in televised opening remarks.
"I accepted your invitation and came here to be at your side on this symbolic day for Russia and for Ukraine as well, I am sure," the Ukrainian leader added in reference to the planned handover of power to Putin.
The political drama in Moscow overshadowed a visit whose importance escalated sharply with Ukraine's announcement last month that it was ready to take its neighbour to an international court over gas.
Ukraine currently serves as Europe's main link to Russia's natural gas supplies and a previous dispute over prices led to a cut-off that lasted three weeks in January 2009.
Russia has been gradually raising the price it charges the former Soviet republics for gas after spending more than a decade subsidising deliveries in exchange for friendlier relations.
Ukraine says it should be paying a price closer to $230 per 1,000 cubic metres than the approximately $400 it will be charged at the turn of the year.
The Kommersant business daily said Ukraine was preparing to lift the price it charges for Russia's gas transits to EU nations if no agreement is reached -- a move certain to anger Moscow.
Kiev has also vowed to take Moscow to an arbitration court in Brussels and refused to join a Russian-led customs union that Medvedev has set out as one of the conditions for a lower gas price.
Moscow is also willing to negotiate a lower price if Ukraine gives up control of its natural gas transmission to Russia's Gazprom monopoly.
Ukraine has rejected the offer and has been ready to make a counter-proposal that would see Russia and the EU take joint stakes in the pipeline network -- a condition rejected by Russia.
Yanukovych called the gas dispute "worrying" in his comments to Medvedev.
Ukraine has rejected the offer and has been ready to make a counter-proposal that would see Russia and the EU take joint stakes in the pipeline network -- a condition rejected by Russia.
Yanukovych called the gas dispute "worrying" in his comments to Medvedev.
Friday, 23 September 2011
Russian Gas Dispute With Ukraine Threatens New Cutoff To Europe
KIEV, Ukraine -- Ukrainian President Viktor Yanukovych visits Moscow today to spar over natural gas contracts as the two former Soviet states risk their third gas war in six years and another disruption to Europe’s supplies.
A renewed cutoff would be the third since 2006 and may encourage the EU, which relies on Russia for a quarter of its gas needs, to accelerate plans to secure alternative gas supplies from the Caspian via the proposed Nabucco pipeline, said Lee.
It would also make EU support for the Russian-led South Stream pipeline to Europe via the Black Sea less likely, he said.
“If there was any suspicion that Russia was manipulating the situation to make a conflict worse than it needed to be, then it would seriously undermine EU comfort with dependence on Russian gas,” Lee said.
Yanukovych, who will meet his Russian counterpart Dmitry Medvedev and Prime Minister Vladimir Putin, is angering Russia with ambitions to move his country of 46 million into the European Union, while cutting dependence on imports of Russian gas, 80 percent of which is shipped via Ukraine to the EU.
A pricing dispute between Russia and Ukraine disrupted deliveries to at least 20 countries for two weeks amid freezing temperatures in January 2009.
It also drove up next-month gas prices in the U.K., Europe’s biggest market, as much as 15 percent and prompted Slovakia’s government to consider a restart of Soviet-era nuclear reactors which it shut after joining the EU in 2004.
A new dispute would come as economies in the region slow because of the effects of a sovereign-debt crisis.
“It’s shaping up as having all the potential for a conflict,” Julian Lee, senior energy analyst at Centre for Global Energy Studies, said Sept. 21 by phone from London.
If supplies to the EU were cut, “it would be very damaging” to European confidence in Russia’s reliability as a gas supplier.
Russia, whose once close ties to Yanukovych have soured, insists that Ukraine must stick to a 10-year agreement signed in 2009.
It has said that a supply reduction may be granted if Ukraine, which plans to import less gas from Jan. 1, drops its objections to joining a Russian-led customs union.Ukraine is seeking to cut costs and to decrease by two- thirds purchases of the fuel in a three-year move starting from 2012. Russian state-gas monopoly OAO Gazprom says it will continue to charge Ukraine the full price for contracted deliveries.
A pricing dispute between Russia and Ukraine disrupted deliveries to at least 20 countries for two weeks amid freezing temperatures in January 2009.
It also drove up next-month gas prices in the U.K., Europe’s biggest market, as much as 15 percent and prompted Slovakia’s government to consider a restart of Soviet-era nuclear reactors which it shut after joining the EU in 2004.
A new dispute would come as economies in the region slow because of the effects of a sovereign-debt crisis.
“It’s shaping up as having all the potential for a conflict,” Julian Lee, senior energy analyst at Centre for Global Energy Studies, said Sept. 21 by phone from London.
If supplies to the EU were cut, “it would be very damaging” to European confidence in Russia’s reliability as a gas supplier.
Russia, whose once close ties to Yanukovych have soured, insists that Ukraine must stick to a 10-year agreement signed in 2009.
It has said that a supply reduction may be granted if Ukraine, which plans to import less gas from Jan. 1, drops its objections to joining a Russian-led customs union.Ukraine is seeking to cut costs and to decrease by two- thirds purchases of the fuel in a three-year move starting from 2012. Russian state-gas monopoly OAO Gazprom says it will continue to charge Ukraine the full price for contracted deliveries.
A renewed cutoff would be the third since 2006 and may encourage the EU, which relies on Russia for a quarter of its gas needs, to accelerate plans to secure alternative gas supplies from the Caspian via the proposed Nabucco pipeline, said Lee.
It would also make EU support for the Russian-led South Stream pipeline to Europe via the Black Sea less likely, he said.
“If there was any suspicion that Russia was manipulating the situation to make a conflict worse than it needed to be, then it would seriously undermine EU comfort with dependence on Russian gas,” Lee said.
Ukraine’s Prime Minister Mykola Azarov said Sept. 20 he “hopes” that the talks in Moscow will “start a review of the 2009 gas contract,” which his country considers “unfair and enslaving.”
The contract was signed by former Premier Yulia Tymoshenko, who’s in jail awaiting trial on charges including abuse of power by agreeing to pay too much for Russian gas.
It requires Ukraine to buy no less than 33 billion cubic meters of gas each year.
The eastern European country, which relies on Russia for more than 60 percent of its gas needs, is seeking to reduce imports to 12.5 billion cubic meters by 2015 from 40 billion cubic meters this year.
It also wants to cut the price from next year’s expected level of $415 per cubic meter to $230.
The contract was signed by former Premier Yulia Tymoshenko, who’s in jail awaiting trial on charges including abuse of power by agreeing to pay too much for Russian gas.
It requires Ukraine to buy no less than 33 billion cubic meters of gas each year.
The eastern European country, which relies on Russia for more than 60 percent of its gas needs, is seeking to reduce imports to 12.5 billion cubic meters by 2015 from 40 billion cubic meters this year.
It also wants to cut the price from next year’s expected level of $415 per cubic meter to $230.
Russia’s leverage in the talks was bolstered earlier this month when Gazprom began pumping gas through the $10 billion subsea Nord Stream pipeline, which bypasses Ukraine by running under the Baltic Sea.
The project will be able to carry enough supplies for 26 million European homes when it’s fully up and running next year and is the first direct link between western Europe and Russia.
The International Monetary Fund postponed a visit to Ukraine planned for early September to late October citing the need for stronger government policies.
The Washington-based IMF’s second review of a $15.6 billion loan with Ukraine has been delayed since March since the Cabinet failed to increase domestic fees for natural gas.
Yanukovych, who replaced his Western-backed rival, Viktor Yushchenko in 2010, is asserting Ukraine’s independence from its neighbor by rejecting an offer to hand over control of Ukrainian state gas company NAK Naftogaz Ukrainy in return for a new contract.
He’s also refusing to join a customs union with Russia, Kazakhstan and Belarus, in return for subsidized gas prices, as this would jeopardize his efforts to negotiate a free-trade accord with the 27-nation EU as a first step toward membership.
The project will be able to carry enough supplies for 26 million European homes when it’s fully up and running next year and is the first direct link between western Europe and Russia.
The International Monetary Fund postponed a visit to Ukraine planned for early September to late October citing the need for stronger government policies.
The Washington-based IMF’s second review of a $15.6 billion loan with Ukraine has been delayed since March since the Cabinet failed to increase domestic fees for natural gas.
Yanukovych, who replaced his Western-backed rival, Viktor Yushchenko in 2010, is asserting Ukraine’s independence from its neighbor by rejecting an offer to hand over control of Ukrainian state gas company NAK Naftogaz Ukrainy in return for a new contract.
He’s also refusing to join a customs union with Russia, Kazakhstan and Belarus, in return for subsidized gas prices, as this would jeopardize his efforts to negotiate a free-trade accord with the 27-nation EU as a first step toward membership.
Putin on Sept. 16 said it was “absolutely unrealistic” for Ukraine to seek EU membership because of the monetary union’s debt crisis.
It will benefit more from regional integration with Russia than from joining the bloc, Putin said at an investment forum in the Black Sea resort of Sochi.
The EU, while not willing to accept Ukrainian membership, wants to resist Russian influence in the former Soviet Union and has made it clear that Ukraine has to keep out of the Russian- led bloc, Alexander Rahr, an analyst at the Berlin-based German Council on Foreign Relations, said by phone on Sept. 21.
Yanukovych, who was a Russian-backed candidate against Yushchenko in 2004, is refusing to back down with Russia and has threatened to sue Gazprom in international court should talks over gas supplies fail.
“The legal battle is likely to be drawn out, which will poison bilateral relations between Kiev and Moscow,” said Lilit Gevorgyan, a London-based analyst at IHS Global Insight.
“Ironically, Yanukovych, who prior to his election was thought to be the Kremlin’s man, faced with resurgent Russian foreign policy toward Ukraine, could be the leader who brings Ukraine closer to the EU than the previous reformist leaders.”
It will benefit more from regional integration with Russia than from joining the bloc, Putin said at an investment forum in the Black Sea resort of Sochi.
The EU, while not willing to accept Ukrainian membership, wants to resist Russian influence in the former Soviet Union and has made it clear that Ukraine has to keep out of the Russian- led bloc, Alexander Rahr, an analyst at the Berlin-based German Council on Foreign Relations, said by phone on Sept. 21.
Yanukovych, who was a Russian-backed candidate against Yushchenko in 2004, is refusing to back down with Russia and has threatened to sue Gazprom in international court should talks over gas supplies fail.
“The legal battle is likely to be drawn out, which will poison bilateral relations between Kiev and Moscow,” said Lilit Gevorgyan, a London-based analyst at IHS Global Insight.
“Ironically, Yanukovych, who prior to his election was thought to be the Kremlin’s man, faced with resurgent Russian foreign policy toward Ukraine, could be the leader who brings Ukraine closer to the EU than the previous reformist leaders.”
Sunday, 18 September 2011
Ukraine Says 'Fair' Price For Russian Gas Is $230 Per 1,000 Cu M
KIEV, Ukraine -- Ukraine believes that the fair price for the purchases of Russian natural gas should be standing at $230 per 1,000 cubic meters, Ukrainian Energy Minister Yuriy Boyko told country's TV channel Inter on Saturday.
The minister said Ukraine pays $355 per 1,000 cubic meters of gas during the third quarter of this year and the price is expected to rise to some $400 in the fourth quarter.
Ukraine, he said, is currently buying the Russian gas at a higher price comparing to other European countries and the figure of $230 was calculated in line with the price that Germany pays Russia, minus transit fees across the Ukrainian territory.
The 10-year gas export contract with Russia, signed in 2009, ties the price for gas to oil prices, which have been rising recently boosting Ukraine's bill.
Former Prime Minister Yulia Tymoshenko is now on trial for signing the deal, and Kiev is at pains to revise it.
Boyko also said that the current gas disagreements between Russia and Ukraine would not disrupt Russian gas deliveries during the coming winter like it happened in January of 2009.
Ukraine transits around 80% of Russia's Europe-bound gas.
Russia, which supplies around one fifth of Europe's gas, briefly shut down supplies via Ukraine's pipeline system at the start of 2009 during a dispute with Kiev over unpaid debt.
Ukraine, he said, is currently buying the Russian gas at a higher price comparing to other European countries and the figure of $230 was calculated in line with the price that Germany pays Russia, minus transit fees across the Ukrainian territory.
The 10-year gas export contract with Russia, signed in 2009, ties the price for gas to oil prices, which have been rising recently boosting Ukraine's bill.
Former Prime Minister Yulia Tymoshenko is now on trial for signing the deal, and Kiev is at pains to revise it.
Boyko also said that the current gas disagreements between Russia and Ukraine would not disrupt Russian gas deliveries during the coming winter like it happened in January of 2009.
Ukraine transits around 80% of Russia's Europe-bound gas.
Russia, which supplies around one fifth of Europe's gas, briefly shut down supplies via Ukraine's pipeline system at the start of 2009 during a dispute with Kiev over unpaid debt.
Ukraine Proposes Alternative To South Stream
YALTA, Ukraine -- Ukrainian President Viktor Yanukovych has proposed building one more gas pipeline across his country instead of the planned South Stream project bypassing it.
Analysts say Russia is unlikely to support the idea because its goal is to minimize transit risks for its gas deliveries to Europe.
Yanukovych said South Stream will cost 25 billion euros.
"We propose a flexible solution that makes the construction of the South Stream pipeline unnecessary," he said Friday at Yalta European Strategy (YES), an international network that promotes Ukraine's European integration.
"If built on land across southern Ukraine, it will cost five times less," Yanukovych said.
According to one Gazprom executive speaking on the sidelines of an investment forum in Sochi, it would be economically inexpedient to build South Stream across Ukraine.
The proposed route of the pipeline is across the Black Sea from Beregovaya in Russia to Bulgaria and on to Western Europe.
"One could lay a gas pipeline via Yevpatoria in the Crimea towards the Black Sea, but this seems illogical when one can build it directly [across the sea]," Valery Golubev, deputy CEO of the Russian energy giant, said.
He thinks that Ukraine's proposal has no economic advantages.
Like Nord Stream, the South Stream gas pipeline is aimed at reducing Russia's dependence on transit across Ukraine.
If the two pipelines are built, Ukraine will lose a substantial part of its transit revenues.
Yanukovych said South Stream will cost 25 billion euros.
"We propose a flexible solution that makes the construction of the South Stream pipeline unnecessary," he said Friday at Yalta European Strategy (YES), an international network that promotes Ukraine's European integration.
"If built on land across southern Ukraine, it will cost five times less," Yanukovych said.
According to one Gazprom executive speaking on the sidelines of an investment forum in Sochi, it would be economically inexpedient to build South Stream across Ukraine.
The proposed route of the pipeline is across the Black Sea from Beregovaya in Russia to Bulgaria and on to Western Europe.
"One could lay a gas pipeline via Yevpatoria in the Crimea towards the Black Sea, but this seems illogical when one can build it directly [across the sea]," Valery Golubev, deputy CEO of the Russian energy giant, said.
He thinks that Ukraine's proposal has no economic advantages.
Like Nord Stream, the South Stream gas pipeline is aimed at reducing Russia's dependence on transit across Ukraine.
If the two pipelines are built, Ukraine will lose a substantial part of its transit revenues.
Yanukovych's proposal is apparently an attempt to expand the range of possible compromises and facilitate the sides' efforts to resolve their gas dispute.
"Russia has absolutely no interest in Ukraine's proposal," Vasily Tanurkov, an analyst with the Veles Capital investment company, told RIA Novosti.
"The reason is simple: the whole purpose of South Stream project is to avoid transit risks. If costs were the only consideration, we would not have proposed it at all; we would have invested in repairing the Ukrainian gas transportation system."
"Ukraine is dreaming of more gas pipelines running across its territory," Vitaly Kryukov, an analyst with investment and financial group Kapital.
"But South Stream will be most likely built. It is an important project and the political decision has been made." Russia's long-term strategy is simple: to end its dependence on transit countries, Kryukov said.
"Such statements are an attempt to demonstrate to the international community that Russia is not acting rationally," Tanurkov said.
"Russia has absolutely no interest in Ukraine's proposal," Vasily Tanurkov, an analyst with the Veles Capital investment company, told RIA Novosti.
"The reason is simple: the whole purpose of South Stream project is to avoid transit risks. If costs were the only consideration, we would not have proposed it at all; we would have invested in repairing the Ukrainian gas transportation system."
"Ukraine is dreaming of more gas pipelines running across its territory," Vitaly Kryukov, an analyst with investment and financial group Kapital.
"But South Stream will be most likely built. It is an important project and the political decision has been made." Russia's long-term strategy is simple: to end its dependence on transit countries, Kryukov said.
"Such statements are an attempt to demonstrate to the international community that Russia is not acting rationally," Tanurkov said.
he price of gas is the main issue Ukraine and Russia have been debating in the last few months.
Ukraine, which currently pays $354 per 1,000 cubic meters, argues that the price is too high.
Russia is ready to negotiate a lower price if Ukraine makes it an interesting proposal, for example, if it agrees to join the Customs Union of Russia, Kazakhstan and Belarus or to sell its gas transportation network.
So far, Ukraine has refused to do either, dragging out the pricing debates for over two years.
"Ukraine can influence the decision on the South Stream project only if it agrees to sell its gas transportation system," Tanurkov said. "If it does, Russia could abandon South Stream."
Vitaly Kryukov believes that Ukraine is not ready to do this now and that in a year or two Russia would lose the desire to buy.
"Moreover, there will be elections in Ukraine and so a possible change of government," Kryukov said.
"It would be safer for Russia as a gas supplier to build pipelines bypassing transit countries and to pass on buying Ukraine's gas transportation grid."
The sides will likely seek a new gas compromise at their talks on September 24, when President Yanukovych will come to Moscow at the invitation of Dmitry Medvedev.
Ukraine, which currently pays $354 per 1,000 cubic meters, argues that the price is too high.
Russia is ready to negotiate a lower price if Ukraine makes it an interesting proposal, for example, if it agrees to join the Customs Union of Russia, Kazakhstan and Belarus or to sell its gas transportation network.
So far, Ukraine has refused to do either, dragging out the pricing debates for over two years.
"Ukraine can influence the decision on the South Stream project only if it agrees to sell its gas transportation system," Tanurkov said. "If it does, Russia could abandon South Stream."
Vitaly Kryukov believes that Ukraine is not ready to do this now and that in a year or two Russia would lose the desire to buy.
"Moreover, there will be elections in Ukraine and so a possible change of government," Kryukov said.
"It would be safer for Russia as a gas supplier to build pipelines bypassing transit countries and to pass on buying Ukraine's gas transportation grid."
The sides will likely seek a new gas compromise at their talks on September 24, when President Yanukovych will come to Moscow at the invitation of Dmitry Medvedev.
Tuesday, 13 September 2011
Ukraine, Russia set up nuclear fuel production plant
Ukraine's Nuclear Fuel state concern and Russian nuclear fuel maker OSJC TVEL have set up the private joint-stock company Nuclear Fuel Production Plant, which will be located in Kirovohrad region, the Ukrainian state concern's press service reported on Tuesday.
According to the press service, at a meeting on September 9, the founders of the plant signed a protocol and the founders' agreement about the establishment of the enterprise.
The enterprise will be located at the industrial site not far from the Smolinska mine in the village of Smoline, Mala Vys district, Kirovograd region, the report reads.
The participants of the meeting of the project management group were Ukraine's Nuclear Fuel state concern and the Ukrainian Scientific Research and Design Institute, and Russia's Rosatom State Nuclear Energy Corporation, OSJC TVEL and JSC State Specialized Design Institute.
As reported, in September 2010, the Ukrainian cabinet approved the results of a tender to build a nuclear fuel production plant, which was won by Russia's OSJC TVEL.
TVEL and Nuclear Fuel state concern signed an agreement on this plant's construction in October 2010.
The terms of the signed agreement say that Ukraine is to gain a controlling stake (50% plus one share) in the future plant and obtain fuel-making technology before 2020.
Russia calls on EU to halt talks on Caspian gas pipeline
Moscow said the European Union should halt talks on a proposed Caspian Sea pipeline to carry natural gas to Europe, characterising the bloc's involvement in the project that would by-pass Russia as "meddling" that could add to tensions in the region.
The 27-member bloc agreed on Monday to kick off negotiations to secure a pipeline deal with Turkmenistan and Azerbaijan - two of the five states bordering the Caspian Sea -- to allow gas from the region, which has the world's fourth-largest reserves, to flow directly to Europe.
An agreement would boost the EU-backed Nabucco pipeline project -- to build a pipeline between Turkey and Austria -- aimed at reducing the bloc's dependence on Russia for a quarter of its natural gas supplies. Russian gas deliveries to Europe have been interrupted as a result of chronic disputes with transit state Ukraine.
"Outside attempts to meddle in affairs in the Caspian... could very seriously complicate the situation in this region (and) negatively affect the ongoing five-party negotiations on the Caspian Sea's legal status," the Russian Foreign Ministry said on its website.
The ministry statement called on the European Union's executive "to respect the position of Russia and the other member state of the Caspian Five and refrain from action."
Russia and the other Caspian Sea littoral states -- Iran, Kazakhstan, Azerbaijan and Turkmenistan -- have been locked in sensitive talks over dividing claims to the sea's huge hydrocarbon reserves currently regulated by Soviet-era agreements.
Nabucco is among several pipelines schemes, including Russia's South Stream project, competing to build a trans-Caspian link with Azerbaijan and Turkmenistan.
Russia has long-term agreements to buy gas from Azerbaijan and Turkmenistan, former Soviet Union republics, which it views as part of its traditional sphere of influence.
Analysts say the Caspian Sea states only produce enough gas to fuel one of the costly new trans-Caspian pipeline projects.
Sunday, 11 September 2011
Will Nord Stream stop the gas wars?
When PM Vladimir Putin clicked on a mouse to start the flow of gas in the Nord Stream pipeline Tuesday, he touted the long-awaited launch, which would bring Russian gas to Germany, as an end to its notorious gas wars with neighboring Ukraine.
But while analysts agree that the new gas route will certainly give Russia additional geopolitical leverage in the energy sector, they warn that Nord Stream is not likely to stop the price disputes entirely – it just might make them different.
“Ukraine is our long-standing, traditional partner. Like any transit country it is tempted to use its transit position,” Vladimir Putin said at the launch of Nord Stream at the Portovaya compressor station in the Leningrad Region, flanked by Gazprom CEO Alexei Miller and former German chancellor Gerhard Schroder. “Now this unique position disappears and our relationship will become more civilized.”
Putin was referring to Ukraine’s attempts to review a gas price agreement clinched in early 2009 between Putin and then Ukrainian Prime Minister Yulia Tymoshenko, the “gas princess” who is now facing charges of abuse of office over the deal, which President Viktor Yanukovich saw as detrimental to Ukraine’s interests.
Russia has refused to reconsider the agreement, and the Nord Stream launch came at a convenient moment.
While the new transit route would reduce gas volumes passing through Ukraine, officials in Kiev downplayed the impact.
“With the increase in gas consumption in Europe, we expect to reduce the volume of transit, yet slightly,” Yuri Boiko, Ukraine’s Minister of Energy and Coal Industry, said on Wednesday, commenting on Putin’s words, RIA Novosti reported. Gazprom annually supplies over 160 billion cubic meters of gas to European markets through Ukraine’s territory, which is three times bigger than the expected capacity of the Nord Stream when the second line of supplies will be launched in 2012, according to experts.
“Even if the Nord Stream works on full capacity, which is around 50 billion cubic meters, we still cannot exclude Ukraine,” Yekaterina Rodina, oil and gas analyst, VTB Capital, told The Moscow News. “Without the transit through our neighbor’s territory, we won’t be able to deliver the same amount of natural gas to Europe. Even if we have the South Stream, which is expected to deliver around 63 billion cubic meters of gas by 2018.”
Experts agree that the new pipeline will not necessarily stop the gas wars like the one in January 2009, when a dispute between Ukraine’s gas and oil giant Naftogaz and Gazprom on prices for gas transit and supplies drastically reduced gas to 18 European countries in the middle of winter. But an additional pipeline will certainly make energy shipments more reliable.
And while the row was ultimately resolved in an hours-long meeting between Putin and Tymoshenko, in May 2010 Vladimir Putin offered to unite Naftogaz and Gazprom.
“The risk of gas wars between Russia and Ukraine will exist until Russia decides to stop exporting gas through its neighbor’s territory, or when Russia stops bringing Ukraine to its knees,” Sergei Aleksashenko, an economist at Carnegie Center Moscow, told The Moscow News.
According to Aleksashenko everything Russia does now is to weaken Ukraine’s position as a gas transit country.
“It’s clear that this is Russia’s aim – we say that Kiev should either join the customs union, or give Naftogaz to us, and pay more than Europe does,” Aleksashenko said.
Some experts pointed to Nord Stream as an alternative pipeline which would help secure gas shipments to Europe.“The long running disagreements between Russia and Ukraine meant that the supplies were not always guaranteed to be available,” Howard Rogers, Senior Research Fellow Oxford Institute for Energy Studies, said in an email. “In this respect then, I would regard the Nord Stream and South Stream projects as ‘transit avoidance’ pipelines. Certainly Western and Central European consumers should be grateful that a substantial portion of their gas supply will be more reliable with the completion of these projects.”
Others said that the additional transit route gave Russia additional leverage – which could indeed stop the conflicts as Putin said.
“Russia has the ace in the hole, or leverage to put pressure on Ukraine. But Europe will feel safer than before, and there will be no repeat of the gas transit problem like a couple of years back,” Slava Bunkov, oil and gas analyst at ATON investment group, told The Moscow News.
Where South Stream is concerned, Bunkov said that the pipeline, which will run under the Black Sea and is due to start shipments in 2015, should not be viewed primarily as a transit avoidance project.
“South Stream is aimed at saving Gazprom’s share in the gas market in Europe, rather than to keep itself from failing to supply gas through transit countries,” he said.
Saturday, 10 September 2011
Nord Stream Deflating Ukraine?
Ukraine's influence as a natural gas transit state declined with the start of the Nord Stream pipeline to Europe, an analysis concluded.
The Nord Stream natural gas pipeline consortium started pumping so-called buffer gas through the first line of the twin pipeline through the Baltic Sea to Germany this week.
Ukraine is trying to negotiate a better deal for the natural gas it gets from Russia.
Pipelines in Ukraine are used to transit about 80 percent of the natural gas Russia sends to Europe.
Acrimony between the countries, however, makes the route politically risky.
Russian energy company Gazprom in 2009 shut off gas supplies to Ukraine, and subsequently to Europe, briefly because of spats with Kiev.
Stratfor, a Texas intelligence company, said that with Nord Stream operational, Ukraine loses much of its bargaining strength.
"Ukraine has often depended on its status as a transit state for Russian natural gas traveling to Europe," an analysis from Stratfor read. "The Nord Stream pipeline has taken much of that leverage away from Kiev."
Kiev has looked to its reserves of shale gas as a potential opportunity to break its link with Russia.
Royal Dutch Shell last week signed an $800 million shale deal with Kiev and may look at liquefied gas options with facilities along the Black Sea coast.
Nord Stream is part of Russia's plans to diversity its transit options.
Gazprom said this week that South Stream, the southern counterpart to Nord Stream, is proceeding as planned.
Ukraine is trying to negotiate a better deal for the natural gas it gets from Russia.
Pipelines in Ukraine are used to transit about 80 percent of the natural gas Russia sends to Europe.
Acrimony between the countries, however, makes the route politically risky.
Russian energy company Gazprom in 2009 shut off gas supplies to Ukraine, and subsequently to Europe, briefly because of spats with Kiev.
Stratfor, a Texas intelligence company, said that with Nord Stream operational, Ukraine loses much of its bargaining strength.
"Ukraine has often depended on its status as a transit state for Russian natural gas traveling to Europe," an analysis from Stratfor read. "The Nord Stream pipeline has taken much of that leverage away from Kiev."
Kiev has looked to its reserves of shale gas as a potential opportunity to break its link with Russia.
Royal Dutch Shell last week signed an $800 million shale deal with Kiev and may look at liquefied gas options with facilities along the Black Sea coast.
Nord Stream is part of Russia's plans to diversity its transit options.
Gazprom said this week that South Stream, the southern counterpart to Nord Stream, is proceeding as planned.
Kiev’s Move Toward EU Fuels Ukraine-Russia Gas Tensions
MOSCOW, Russia -- Russia and Ukraine are in tough talks to avoid what could be their third gas war in five years. Our correspondent reports on what is behind the tension.
“Our position here is that we really do aspire to become part, and a member of, the European Union," he said.
Parallel to these talks with Europe, talks with Moscow on Ukraine’s 10-year gas contract are getting increasingly sharp.
On Tuesday, Prime Minister Vladimir Putin symbolically opened North Stream - a direct Russia-Germany gas line that runs under the Baltic Sea.
The line is essentially a 1,200-kilometer end run around transit countries, such as Ukraine.
After turning a pipeline wheel, Putin declared, “We are slowly and surely turning away from the dictates of transit states.”
Believing that Russia has a strong hand, Mr. Putin has said that Ukraine would also get a gas price discount if it allowed Gazprom, Russia’s state gas company, to buy Naftogaz, Ukraine’s state gas company.
Alyona Getmanchuk, director of Kiev’s World Policy Institute, compares that merger to “a supermarket taking over a kiosque.”
She says Gazprom contracts tie Russian gas prices to world oil prices. They are on a ‘take or pay’ basis.
She says companies have to pay for gas they do not use. World gas prices are low as shale gas production has soared in the United States, taking the U.S. out of the market as an importer.
On Friday, Russian President Dmitry Medvedev warned Ukraine, “You can’t torpedo existing contracts.”
Earlier, Ukrainian President Viktor Yanukovych threatened to take Russia to international arbitration to decide their fight over Ukraine’s top import - Russian gas.
The move calls into question the Russia-Ukraine rapprochement that was supposed to follow last year’s election of Mr. Yanukovych, the so-called "pro-Russian candidate."
Oleg Voloshyn, a spokesman for Ukraine’s government, says in an interview in Kiev that behind the rancor is Ukraine’s refusal to join a Moscow-led customs union.
“We want to be friends with Russia, but we want to move to European Union," said Voloshyn.
In the last year, Russia’s top leaders have all spelled out to President Yanukovych the benefits of joining a customs union with Russia, Belarus and Kazakhstan.
Gazprom has dangled an $8-billion discount on Ukraine’s gas bill. But in a series of personal rebuffs, Ukraine’s president repeatedly refused.
Viktor Chumak, director of the Ukrainian Public Policy Institute, says public opinion polls consistently show that more than 70 percent of Ukrainians want their country to join the European Union.
Chumak says Ukraine’s government and opposition are only divided regarding tactics on how to reach the same goal - joining the EU.
In public statements before and after Ukraine’s August 24 Independence Day celebrations, President Yanukovych flatly stated that he has set a 10-year goal for Ukraine to join the European Union.
He hopes that a framework agreement will be signed by December between Ukraine and the European Union.Oleg Voloshyn at the Foreign Ministry again:
Earlier, Ukrainian President Viktor Yanukovych threatened to take Russia to international arbitration to decide their fight over Ukraine’s top import - Russian gas.
The move calls into question the Russia-Ukraine rapprochement that was supposed to follow last year’s election of Mr. Yanukovych, the so-called "pro-Russian candidate."
Oleg Voloshyn, a spokesman for Ukraine’s government, says in an interview in Kiev that behind the rancor is Ukraine’s refusal to join a Moscow-led customs union.
“We want to be friends with Russia, but we want to move to European Union," said Voloshyn.
In the last year, Russia’s top leaders have all spelled out to President Yanukovych the benefits of joining a customs union with Russia, Belarus and Kazakhstan.
Gazprom has dangled an $8-billion discount on Ukraine’s gas bill. But in a series of personal rebuffs, Ukraine’s president repeatedly refused.
Viktor Chumak, director of the Ukrainian Public Policy Institute, says public opinion polls consistently show that more than 70 percent of Ukrainians want their country to join the European Union.
Chumak says Ukraine’s government and opposition are only divided regarding tactics on how to reach the same goal - joining the EU.
In public statements before and after Ukraine’s August 24 Independence Day celebrations, President Yanukovych flatly stated that he has set a 10-year goal for Ukraine to join the European Union.
He hopes that a framework agreement will be signed by December between Ukraine and the European Union.Oleg Voloshyn at the Foreign Ministry again:
“Our position here is that we really do aspire to become part, and a member of, the European Union," he said.
Parallel to these talks with Europe, talks with Moscow on Ukraine’s 10-year gas contract are getting increasingly sharp.
On Tuesday, Prime Minister Vladimir Putin symbolically opened North Stream - a direct Russia-Germany gas line that runs under the Baltic Sea.
The line is essentially a 1,200-kilometer end run around transit countries, such as Ukraine.
After turning a pipeline wheel, Putin declared, “We are slowly and surely turning away from the dictates of transit states.”
Believing that Russia has a strong hand, Mr. Putin has said that Ukraine would also get a gas price discount if it allowed Gazprom, Russia’s state gas company, to buy Naftogaz, Ukraine’s state gas company.
Alyona Getmanchuk, director of Kiev’s World Policy Institute, compares that merger to “a supermarket taking over a kiosque.”
She says Gazprom contracts tie Russian gas prices to world oil prices. They are on a ‘take or pay’ basis.
She says companies have to pay for gas they do not use. World gas prices are low as shale gas production has soared in the United States, taking the U.S. out of the market as an importer.
Companies in Greece, Germany and Italy are seeking to cut the link between gas and oil prices - and to bring Russian gas prices down to world levels.
With billions of dollars at stake, Kiev’s Getmanchuk believes that another gas war is in the cards.
In the last gas war, in January 2009, Russia cut gas supplies to Ukraine, affecting at least 10 European countries for three weeks in the middle of winter.
With billions of dollars at stake, Kiev’s Getmanchuk believes that another gas war is in the cards.
In the last gas war, in January 2009, Russia cut gas supplies to Ukraine, affecting at least 10 European countries for three weeks in the middle of winter.
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