Russian gas giant Gazprom said on Feb. 22 it would aim to completely stop gas transit via Ukraine when it builds new pipelines later this decade as tensions between the two countries over gas prices and transit escalated.
Gazprom blamed Ukraine for shortages reported by its customers in Europe at the peak of a cold spell this month.
“Significant volumes of gas transhipped through Ukraine failed to reach Europe,” Gazprom Chief Executive Alexei Miller said at a meeting with Russian President Dmitry Medvedev, according to Medvedev’s office.
“On certain days, up to 40 million cubic meters of gas was kept in Ukraine and this, without doubt, incurred both financial and reputational losses on Gazprom.”
Ukrainian state energy company Naftogaz denied that. “Since the beginning of 2012, Naftogaz has not taken a single cubic metre of gas from the volumes that were shipped by Gazprom to Europe,” it said in a statement.
But citing worries over the security of transit, Medvedev ordered Gazprom to maximise the capacity of the planned South Stream pipeline across the Black Sea which will bypass Ukraine.
Gazprom plans to launch South Stream in 2015 with a capacity of 63 billion cubic metres (bcm) a year.
Coupled with Nord Stream, a pipeline through the Baltic Sea that Gazprom launched last year with plans to eventually double its capacity to 55 bcm a year, South Stream could allow Gazprom to drop Ukraine as a transit nation.
Russia shipped 104 bcm of gas through Ukrainian pipelines last year.
Moscow has accused Kyiv of siphoning gas bound for Europe in the past, most recently in early 2009, when the two ex-Soviet nations were locked in a bitter dispute over supply prices which briefly disrupted supplies to Europe.
Ukraine is also unhappy with the price of Russian gas it imports and has sought to renegotiate the price for over a year but the talks appear to have stalled.
This month, Russia said it had offered Ukraine a new gas deal, which according to media reports provides for a 10-percent price discount.
But Kyiv, which sees a fair price at $250 per thousand cubic meters, down from $416 it currently pays, has not commented on the offer.
Showing posts with label gas. Show all posts
Showing posts with label gas. Show all posts
Saturday, 25 February 2012
Tuesday, 17 January 2012
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.
Sunday, 1 January 2012
Ukraine Asks For $9 Billion Gas Discount From Russia To Form Joint Transit Consortium
NOVO-OGARYOVO, Russia -- Kiev is seeking a $9 billion annual gas discount to reach agreement with Moscow on operating the Ukrainian gas transportation system, Russian gas export monopoly Gazprom CEO Alexei Miller said on Friday.
At their ongoing gas price talks, Moscow and Kiev have been recently discussing the possibility of creating a joint venture to operate the Ukrainian gas transportation system, a core transit route for Russian natural gas supplies to Europe.
"Our Ukrainian counterparts raised the question of a discount for gas prices during the talks. If we calculate a volume of 40 billion cubic meters, the volume which Ukraine has to buy as part of the terms of the current contract, the discount may be about $9 billion annually," Miller told Prime Minister Vladimir Putin.
Ukraine has long been seeking to alter the terms of the 2009 gas deal it signed with Russia.
The deal ties the price of gas to oil prices, which have risen strongly since 2009, boosting Ukraine's gas bill. Kiev insists on reducing both the price and the volume of gas imports.
Miller also said Ukraine estimated the value of its gas transportation system at $20 billion.
"Our Ukrainian friends mentioned the that they value their gas transportation system at $20 billion. It is a big sum taking into account that we will have to spend large amounts on its modernization," Gazprom CEO said, adding that the upgrade might cost from two to eight billion euros.
Putin told Miller the talks to form the consortium should be continued as gas supplies through the Ukrainian gas transportation system will be in demand amid rising gas consumption in Europe.
Moscow initiated the South Stream gas pipeline project to diversify Russian gas routes away from transit countries such as Ukraine.
Russia plans to launch South Stream, intended to carry Russian natural gas to Europe along the Black Sea bed, in 2015.
The pipeline will transport up to 63 billion cubic meters of gas to central and southern Europe.
Putin also ordered faster construction of the pipeline and the start of its underwater section by the end of 2012, not in 2013 as previously planned.
At their ongoing gas price talks, Moscow and Kiev have been recently discussing the possibility of creating a joint venture to operate the Ukrainian gas transportation system, a core transit route for Russian natural gas supplies to Europe.
"Our Ukrainian counterparts raised the question of a discount for gas prices during the talks. If we calculate a volume of 40 billion cubic meters, the volume which Ukraine has to buy as part of the terms of the current contract, the discount may be about $9 billion annually," Miller told Prime Minister Vladimir Putin.
Ukraine has long been seeking to alter the terms of the 2009 gas deal it signed with Russia.
The deal ties the price of gas to oil prices, which have risen strongly since 2009, boosting Ukraine's gas bill. Kiev insists on reducing both the price and the volume of gas imports.
Miller also said Ukraine estimated the value of its gas transportation system at $20 billion.
"Our Ukrainian friends mentioned the that they value their gas transportation system at $20 billion. It is a big sum taking into account that we will have to spend large amounts on its modernization," Gazprom CEO said, adding that the upgrade might cost from two to eight billion euros.
Putin told Miller the talks to form the consortium should be continued as gas supplies through the Ukrainian gas transportation system will be in demand amid rising gas consumption in Europe.
Moscow initiated the South Stream gas pipeline project to diversify Russian gas routes away from transit countries such as Ukraine.
Russia plans to launch South Stream, intended to carry Russian natural gas to Europe along the Black Sea bed, in 2015.
The pipeline will transport up to 63 billion cubic meters of gas to central and southern Europe.
Putin also ordered faster construction of the pipeline and the start of its underwater section by the end of 2012, not in 2013 as previously planned.
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.
Saturday, 29 October 2011
Breaking the ice
Russia is slated to invest some $224 billion into Arctic oil and gas exploration through 2030, with the government picking up the tab for $32 billion – and the profits are expected to amount to almost half a trillion dollars.
The Natural Resource Ministry is keen to bring in a slew of private and state-owned firms to invest, and profit from, the program.
“The Ministry believes it’s high time to extend the list of firms that can develop the Arctic shelf and include relevant legal entities registered in Russia and abroad,” a spokesperson for the ministry’s state policy department told The Moscow News. “The Ministry proposes to improve tax and customs systems, intended to improve the investment climate.”
According to the ministry, only two domestic companies are currently allowed to conduct continental shelf exploration – state-owned Gazprom and Rosneft.
Gazprom has applied to the ministry for eight licenses to launch future exploration projects in the Arctic.
“In April 2011 Gazprom approved a program to develop hydrocarbon resources on the continental shelf in Russia through 2030,” a Gazprom spokesperson told The Moscow News.
The Arctic shelf holds some 70 billion tons of oil and gas, the largest reservoir in Russia. Gazprom hopes to get as much as 200 billion cubic meters of natural gas and over 10 million tons of oil from the shelf annually starting in 2030. But experts point to a number of problems that need to be resolved before the exploration program gets underway.
“There is no technology to ship fossil fuels from the sea to the terminal on the coast. For instance, the Shtokman field, the most promising gas field in the Barents Sea, is 650 km away from the nearest village on the Kola Peninsula.
If the fuel is shipped with tankers, it will become simply too expensive and [not profitable],” Mikhail Khutorskoy, a geology expert with the Institute of Geology at the Russian Academy of Science, told The Moscow News.
Another option – building a pipeline on the seabed – is too risky because it could be destroyed by icebergs, Khutorskoy added. “If there is an oil or gas spill there, then the ecological consequences will be disastrous,” he said.
Khutorskoy pointed to another problem – the cost of pumping in the absence of new technologies or a modern scientific approach. “We spend a lot of money on drilling, which can cost over $30 million per operation.”
These problems, Khutorskoy said, have yet to be solved. “If Russia wants to start oil and gas exploration before 2030, then we need to do something about it now. There are 18 years to prepare the specialists in oil and gas and get the technology updated,” Khutorskoy said.
Khutorskoy warned that without proper scientific study there might be no export potential left for Russian oil and gas by 2015.
With Russia about to spend over $200 billion on the project, experts also warn that only very high oil prices can justify the program.
“Huge investments are required to develop the shelf, and this will be justified only for sufficiently high oil prices and tax breaks,”.
Russia has been keen to claim the Arctic as its own territory. Just last year, the dormant Russian Geographical Society was revamped on orders from Prime Minister Vladimir Putin to launch a new series of expeditions to the Arctic.
Putin went on to invite BP CEO Bob Dudley last summer, in a move that raised questions about whether BP had its eyes set on Russian oil and gas in the Arctic.
Russian Geographical Society was not available for a comment Thursday on whether it would be involved in the new exploration program.
Environmental concerns
The exploration program is also raising serious concern over the potential of oil spills.
“The company uses the latest developments in the field of industrial and environmental safety to minimize negative impact on the environment. Gazprom is also consulting with leading environmental organizations and implementing a number of environmental monitoring programs,” Gazprom’s press service said in emailed comments.
However, experts warn that the risk of environmental damage is very high in the Arctic and may yet incur costs on Russian companies. By involving European companies, the project will have to comply with European standards – meaning it will have to pay European environmental fines, which are much higher than in Russia. “Rosneft and Gazprom could simply go bankrupt by paying multi-billion dollar fines,” Mikhail Khutorskoy said.
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.
Medvedev Hopes Ukraine Will Honor Gas Deal With Russia
MOSCOW, Russia -- Russian President Dmitry Medvedev said he hoped Ukraine would stick to the existing gas agreement with Russia and expressed Moscow's readiness to discuss "various cooperation schemes" with Kiev that may result in a lower gas price for Ukraine.
"So far, there's no conflict," between Russia and Ukraine on the gas issue, Medvedev said in an interview with Euronews, "rather there are differences that might lead to various developments."
Ukraine wants Russia to tear up a 10-year deal, agreed on by former Prime Minister Yulia Tymoshenko in 2009.
Kiev says the deal set an excessively high price for Russian gas and forces it to import more gas than it needs.
"I hope that after all the recent experiences our close partners and friends must learn that you can't torpedo existing contracts - even if you don't like them," Medvedev said.
"It is completely unacceptable. All agreements, as long as they are not refuted in court or abandoned by the parties, must be carried out."
Ukraine has threatened to slash gas purchases to 27 billion cubic meters of gas next year, down from 40 bcm this year, but Russian energy giant Gazprom said that under its 'take-or-pay' contract with Ukraine's energy company Naftogaz Kiev has to pay for 33 bcm of gas regardless of the volume of purchases.
"I hope that our partners, our Ukrainian friends will likewise stick strictly to the framework agreement concluded in 2009," Medvedev said.
He also reiterated that Russia was "willing to discuss various cooperation schemes" with Ukraine, including "advanced plans" based on Ukraine's integration in the Customs Union.
Russia has rejected a proposal by Ukrainian President Viktor Yanukovych on Ukraine's cooperation with the Customs Union of Russia, Belarus and Kazakhstan in a 3+1 format.
Ukraine wants Russia to tear up a 10-year deal, agreed on by former Prime Minister Yulia Tymoshenko in 2009.
Kiev says the deal set an excessively high price for Russian gas and forces it to import more gas than it needs.
"I hope that after all the recent experiences our close partners and friends must learn that you can't torpedo existing contracts - even if you don't like them," Medvedev said.
"It is completely unacceptable. All agreements, as long as they are not refuted in court or abandoned by the parties, must be carried out."
Ukraine has threatened to slash gas purchases to 27 billion cubic meters of gas next year, down from 40 bcm this year, but Russian energy giant Gazprom said that under its 'take-or-pay' contract with Ukraine's energy company Naftogaz Kiev has to pay for 33 bcm of gas regardless of the volume of purchases.
"I hope that our partners, our Ukrainian friends will likewise stick strictly to the framework agreement concluded in 2009," Medvedev said.
He also reiterated that Russia was "willing to discuss various cooperation schemes" with Ukraine, including "advanced plans" based on Ukraine's integration in the Customs Union.
Russia has rejected a proposal by Ukrainian President Viktor Yanukovych on Ukraine's cooperation with the Customs Union of Russia, Belarus and Kazakhstan in a 3+1 format.
Moscow says Ukraine should become a full member of the Customs Union if it wants to get a discount on Russian gas.
Gazprom has said a union entry would cut the country's gas bill by $8 billion every year.
Medvedev said Russia could also discuss integration with Ukraine "based on some other approaches, including our investment in Ukraine's economy or gas transport system."
"If we can agree on this, we will probably be ready to consider change in the scheme of [gas] cooperation," he said.
He added, however, that "the immutable principle remains" that gas cooperation is "always" based on a "universal" formula.
"Talk like 'we're paying more than other countries' isn't based on anything," the president said. This is pure propaganda."
The Russian-Ukrainian gas deal ties the price of gas to the price of oil, which had been rising steadily until recently, boosting Kiev's bill.
"Ukraine pays by the same formula, and pays commensurate with the price paid by other European consumers," Medvedev said.
"Current prices are high, that's true. But they can also be extremely low sometimes. And then it's a problem for the energy supplier."
Gazprom has said a union entry would cut the country's gas bill by $8 billion every year.
Medvedev said Russia could also discuss integration with Ukraine "based on some other approaches, including our investment in Ukraine's economy or gas transport system."
"If we can agree on this, we will probably be ready to consider change in the scheme of [gas] cooperation," he said.
He added, however, that "the immutable principle remains" that gas cooperation is "always" based on a "universal" formula.
"Talk like 'we're paying more than other countries' isn't based on anything," the president said. This is pure propaganda."
The Russian-Ukrainian gas deal ties the price of gas to the price of oil, which had been rising steadily until recently, boosting Kiev's bill.
"Ukraine pays by the same formula, and pays commensurate with the price paid by other European consumers," Medvedev said.
"Current prices are high, that's true. But they can also be extremely low sometimes. And then it's a problem for the energy supplier."
Russia puts squeeze on Ukraine over gas
Ukrainian leaders hope to cut use of expensive imports.
Relations between Russia and Ukraine are strained yet again over the price of natural gas.
Ukraine is threatening to challenge the validity of its 2009 contract with Russia’s Gazprom, brokered then by Prime Minister Vladimir Putin and former Prime Minister Yulia Tymoshenko, who is now jailed and on trial for alleged abuse of office in relation to the deal.
The agreement, which Russia says is valid and fair, puts Ukraine in a tough financial position. The price of 1,000 cubic meters of gas could rise to as high as $450 this year – eating up 20 percent of the state budget for the pricey import that fuels Ukraine’s heavy industries, according to President Viktor Yanukovych, Tymoshenko bitter rival.
It’s simply too much for Ukraine’s economy to bear, Yanukovych added.
“Ukraine pays around $200 more [per 1,000 cubic meters] for gas than Germany does,” Yanukovych told Kommersant business daily in a Sept.6 interview.
The president said the nation is ready to appeal to either the international court in Stockholm or The Hague for revocation of the contract.
However, Ukraine’s leverage over the gas deal appeared to weaken as Moscow on Sept. 6 gleefully trumpeted the opening of the Nord Stream gas pipeline, which traverses the Baltic Sea bed connecting Russia and Germany. When the twin pipes are fully operational next year, the lines are expected to carry up to 55 billion cubic meters of gas.
The pipeline potentially threatens Ukraine’s privileged status as the transit nation for 80 percent of Russia’s natural gas supplies to Europe.
Russia supplies about a quarter of Europe’s natural gas needs. Ukraine makes billions of dollars in transit fees each year, transporting about 100 billion cubic meters of Russian gas to Europe.
The current transit fees are $2.89 per 1,000 cubic meters of gas per 100 kilometers.
Russia is also threatening to bypass Ukraine on its southern side by seeking to build the South Stream pipeline on the Black Sea bed.
Russia said that cheaper gas can only come to Ukraine if its smaller neighbor joins the Moscow-led customs union with Kazakhstan and Belarus.
The trade grouping is fundamentally at odds with Ukraine’s desire to clinch a free-trade agreement with the European Union before year’s end.
“It seems to me that we have made a clear offer: if you want a gas discount, you must join the integrated zone…or you must make a business offer that has benefits for Russia, for example, the sale of the gas transport grid,” said Russian President Dmitry Medvedev on Aug. 31.
Penta think tank head Volodymyr Fesenko said that “it is obvious that Russia is not ready for any kind of compromise yet.”
Ukraine says it won’t sell its transit pipelines to Russia, nor will it merge state energy monopoly Naftogaz with Russian behemoth Gazprom. In fact, Ukraine is on the verge of breaking up Naftogaz into separate companies involved in transport, trade and extraction.
The rhetoric is heating up. On Aug. 31, Russia’s Perviy Kanal (First Channel) accused Yanukovych of lobbying the interests of Ukrainian oligarchs, the billionaire owners of Ukraine’s energy-guzzling steel and chemical plants, at the expense of relations with Russia.
Yanukovych appears to be getting the same Kremlin-engineered PR savagery as Belarusian President Alexander Lukashenko did when he showed reluctance to join the customs union. Lukashenko quickly fell in line with Moscow’s aims, even losing control of his nation’s gas transit pipelines to Russia.
During the Sept. 6 launch of Nord Stream, Putin boasted that the Baltic corridor “will deprive Ukraine of its status of exclusive transporter of Russian gas to Europe.” However, analysts say that Nord Stream is not quite the threat to Ukraine that the Kremlin claims it is.
“Ukraine has always transported Russian gas to Central and Southern Europe, but never to Western and Northern EU countries, which would now get gas via Nord Stream.
Russia will not have any alternative to Ukrainian pipelines in foreseeable future,” said Yuriy Korolchuk, an expert at the Kyiv-based Institute of Energy Research.
Warning that it simply can’t afford expensive Russian gas anymore, Ukrainian officials announced days ago that they had asked Gazprom to accept a reduction of annual supplies starting next year from 40 to 27 billion cubic meters.
Kyiv also warned that if Russia does not reduce its prices to reasonable levels, it would in future years cut imports further to about 12 billion cubic meters, compensating with domestic production and imports of liquefied natural gas from Azerbaijan.
“During next 5 years we plan to consume three times less Russian gas and substitute it [partially] with Ukrainian coal,” Ukrainian Prime Minister Mykola Azarov said recently.
Russia’s three-week gas shutoff to Ukraine in January 2009 cut supplies to 18 European countries, raising concerns about the reliability of the Russia-Ukraine-Europe network.
The new conflict is coming at a pivotal time in the Ukraine-EU relationship. Ukraine is seeing an association agreement that includes a free-trade deal and a relaxation of stringent visa rules.
“There will be a lot of arm twisting in the EU about that. Under the Polish presidency Ukraine has strong chances to get associate agreement if Ukraine will be wise and will not fuel a new gas war and give Tymoshenko suspended sentence,” said Edward Lucas, editor at The Economist and author of The New Cold War book.
Political analyst Vadym Karasyov said the “Yanukovych administration faces a very tough situation. On the one side they have Russia which criticizes them and protects Tymoshenko.On the other hand there is Europe which also criticizes and protects Tymoshenko. But to spare Tymoshenko is to free an opponent, who can now get both Russian and European support.”
In the end, Ukraine can come out of the tough period in better shape – if it increases its domestic share of energy supply, attracts investment to upgrade its vast but inefficient transit pipelines and uses energy more efficiently.
“The real point is that Ukraine needs to reform its gas industry. Corruption around Naftogaz and mismanagement in Ukraine give Russia the opportunity to use this situation,” Lucas said.
Vitaliy Bala, director of the Situations Modeling Agency, said a new pragmatism is welcome.
“Myths about brotherhood [with Russia] are not working anymore. We became pragmatic in our attitude towards Russia,” Bala said. “The most important thing for Ukraine now is to be firm and demand to be treated like an equal.”
Relations between Russia and Ukraine are strained yet again over the price of natural gas.
Ukraine is threatening to challenge the validity of its 2009 contract with Russia’s Gazprom, brokered then by Prime Minister Vladimir Putin and former Prime Minister Yulia Tymoshenko, who is now jailed and on trial for alleged abuse of office in relation to the deal.
The agreement, which Russia says is valid and fair, puts Ukraine in a tough financial position. The price of 1,000 cubic meters of gas could rise to as high as $450 this year – eating up 20 percent of the state budget for the pricey import that fuels Ukraine’s heavy industries, according to President Viktor Yanukovych, Tymoshenko bitter rival.
It’s simply too much for Ukraine’s economy to bear, Yanukovych added.
“Ukraine pays around $200 more [per 1,000 cubic meters] for gas than Germany does,” Yanukovych told Kommersant business daily in a Sept.6 interview.
The president said the nation is ready to appeal to either the international court in Stockholm or The Hague for revocation of the contract.
However, Ukraine’s leverage over the gas deal appeared to weaken as Moscow on Sept. 6 gleefully trumpeted the opening of the Nord Stream gas pipeline, which traverses the Baltic Sea bed connecting Russia and Germany. When the twin pipes are fully operational next year, the lines are expected to carry up to 55 billion cubic meters of gas.
The pipeline potentially threatens Ukraine’s privileged status as the transit nation for 80 percent of Russia’s natural gas supplies to Europe.
Russia supplies about a quarter of Europe’s natural gas needs. Ukraine makes billions of dollars in transit fees each year, transporting about 100 billion cubic meters of Russian gas to Europe.
The current transit fees are $2.89 per 1,000 cubic meters of gas per 100 kilometers.
Russia is also threatening to bypass Ukraine on its southern side by seeking to build the South Stream pipeline on the Black Sea bed.
Russia said that cheaper gas can only come to Ukraine if its smaller neighbor joins the Moscow-led customs union with Kazakhstan and Belarus.
The trade grouping is fundamentally at odds with Ukraine’s desire to clinch a free-trade agreement with the European Union before year’s end.
“It seems to me that we have made a clear offer: if you want a gas discount, you must join the integrated zone…or you must make a business offer that has benefits for Russia, for example, the sale of the gas transport grid,” said Russian President Dmitry Medvedev on Aug. 31.
Penta think tank head Volodymyr Fesenko said that “it is obvious that Russia is not ready for any kind of compromise yet.”
Ukraine says it won’t sell its transit pipelines to Russia, nor will it merge state energy monopoly Naftogaz with Russian behemoth Gazprom. In fact, Ukraine is on the verge of breaking up Naftogaz into separate companies involved in transport, trade and extraction.
The rhetoric is heating up. On Aug. 31, Russia’s Perviy Kanal (First Channel) accused Yanukovych of lobbying the interests of Ukrainian oligarchs, the billionaire owners of Ukraine’s energy-guzzling steel and chemical plants, at the expense of relations with Russia.
Yanukovych appears to be getting the same Kremlin-engineered PR savagery as Belarusian President Alexander Lukashenko did when he showed reluctance to join the customs union. Lukashenko quickly fell in line with Moscow’s aims, even losing control of his nation’s gas transit pipelines to Russia.
During the Sept. 6 launch of Nord Stream, Putin boasted that the Baltic corridor “will deprive Ukraine of its status of exclusive transporter of Russian gas to Europe.” However, analysts say that Nord Stream is not quite the threat to Ukraine that the Kremlin claims it is.
“Ukraine has always transported Russian gas to Central and Southern Europe, but never to Western and Northern EU countries, which would now get gas via Nord Stream.
Russia will not have any alternative to Ukrainian pipelines in foreseeable future,” said Yuriy Korolchuk, an expert at the Kyiv-based Institute of Energy Research.
Warning that it simply can’t afford expensive Russian gas anymore, Ukrainian officials announced days ago that they had asked Gazprom to accept a reduction of annual supplies starting next year from 40 to 27 billion cubic meters.
Kyiv also warned that if Russia does not reduce its prices to reasonable levels, it would in future years cut imports further to about 12 billion cubic meters, compensating with domestic production and imports of liquefied natural gas from Azerbaijan.
“During next 5 years we plan to consume three times less Russian gas and substitute it [partially] with Ukrainian coal,” Ukrainian Prime Minister Mykola Azarov said recently.
Russia’s three-week gas shutoff to Ukraine in January 2009 cut supplies to 18 European countries, raising concerns about the reliability of the Russia-Ukraine-Europe network.
The new conflict is coming at a pivotal time in the Ukraine-EU relationship. Ukraine is seeing an association agreement that includes a free-trade deal and a relaxation of stringent visa rules.
“There will be a lot of arm twisting in the EU about that. Under the Polish presidency Ukraine has strong chances to get associate agreement if Ukraine will be wise and will not fuel a new gas war and give Tymoshenko suspended sentence,” said Edward Lucas, editor at The Economist and author of The New Cold War book.
Political analyst Vadym Karasyov said the “Yanukovych administration faces a very tough situation. On the one side they have Russia which criticizes them and protects Tymoshenko.On the other hand there is Europe which also criticizes and protects Tymoshenko. But to spare Tymoshenko is to free an opponent, who can now get both Russian and European support.”
In the end, Ukraine can come out of the tough period in better shape – if it increases its domestic share of energy supply, attracts investment to upgrade its vast but inefficient transit pipelines and uses energy more efficiently.
“The real point is that Ukraine needs to reform its gas industry. Corruption around Naftogaz and mismanagement in Ukraine give Russia the opportunity to use this situation,” Lucas said.
Vitaliy Bala, director of the Situations Modeling Agency, said a new pragmatism is welcome.
“Myths about brotherhood [with Russia] are not working anymore. We became pragmatic in our attitude towards Russia,” Bala said. “The most important thing for Ukraine now is to be firm and demand to be treated like an equal.”
Thursday, 1 September 2011
Ukraine Must Pay For 33 Bcm Of Gas Regardless Of Delivery - Gazprom
MOSCOW, Russia -- Kiev must pay for 33 billion cubic meters of gas a year regardless of actual purchases, as stipulated by the contract between Russian gas giant Gazprom and Ukraine's national energy firm Naftogaz, Gazprom CEO Alexei Miller said on Wednesday.
His comments came in the wake of Ukraine's request for 27 bcm of gas next year, well below this year's 40 bcm.
"Gazprom may supply Ukraine with 26, 27 or 29 bcm of gas in 2012 or supply nothing if Ukraine wants," Miller told reporters.
"In any case Naftogaz of Ukraine will pay for supplies on the basis of no less than 33 bcm. These are take-or-pay terms under the current contract and they will be used this year and for the duration of the contract."
Ukraine has been seeking a revision of its 2009 gas deal with Russia since last spring, saying that the gas price formula is unfair.
Russia has tied the price for gas to the international spot price for oil, which has been rising strongly recently.
Ukraine's presidential administration head Sergei Lyovochkin has said Kiev had set an October 15 deadline for trying to revise the contract, UNIA agency reported.
The date is the start of the heating season in Ukraine.
The 2009 contract was signed by former prime minister Yulia Tymoshenko who is now on trial for signing it.
Last week Russian President Dmitry Medvedev said the contract must be fulfiled but added that discounts were possible if Kiev joined the Customs Union of Russia, Belarus and Kazakhstan and agreed that acquisition of its Naftogaz energy company by Gazprom.
In January 2009, a pricing row between Moscow and Kiev led to a stoppage of Russian gas flows to Europe for about two weeks, tarnishing Moscow's image as a reliable exporter and spurring a European quest for new suppliers.
Gazprom's clients have long been complaining about its long-term contracts which include the 'take-or-pay' principle, saying prices were lower on the spot market.
"Gazprom may supply Ukraine with 26, 27 or 29 bcm of gas in 2012 or supply nothing if Ukraine wants," Miller told reporters.
"In any case Naftogaz of Ukraine will pay for supplies on the basis of no less than 33 bcm. These are take-or-pay terms under the current contract and they will be used this year and for the duration of the contract."
Ukraine has been seeking a revision of its 2009 gas deal with Russia since last spring, saying that the gas price formula is unfair.
Russia has tied the price for gas to the international spot price for oil, which has been rising strongly recently.
Ukraine's presidential administration head Sergei Lyovochkin has said Kiev had set an October 15 deadline for trying to revise the contract, UNIA agency reported.
The date is the start of the heating season in Ukraine.
The 2009 contract was signed by former prime minister Yulia Tymoshenko who is now on trial for signing it.
Last week Russian President Dmitry Medvedev said the contract must be fulfiled but added that discounts were possible if Kiev joined the Customs Union of Russia, Belarus and Kazakhstan and agreed that acquisition of its Naftogaz energy company by Gazprom.
In January 2009, a pricing row between Moscow and Kiev led to a stoppage of Russian gas flows to Europe for about two weeks, tarnishing Moscow's image as a reliable exporter and spurring a European quest for new suppliers.
Gazprom's clients have long been complaining about its long-term contracts which include the 'take-or-pay' principle, saying prices were lower on the spot market.
Italy's Edison recently won a court ruling which helped it cut gas prices.
Germany's E.ON, one of Gazprom's key Western clients, has also gone to court over prices.
Gazprom has recently had to cut prices for Greece.
Germany's E.ON, one of Gazprom's key Western clients, has also gone to court over prices.
Gazprom has recently had to cut prices for Greece.
Sunday, 14 August 2011
Russia, Ukraine ‘Heading For New Gas Conflict’
MOSCOW, Russia -- Russia warned neighbour Ukraine yesterday against acting unreasonably amid reports that the two sides were approaching a gas war similar to a 2009 standoff that briefly cut supplies to EU states.
Russian President Dmitry Medvedev and Ukraine’s Viktor Yanukovych held a summit in Sochi on Thursday aimed at easing tensions that have grown over the last months over gas prices and Ukrainian moves to promote EU ties.
But the meeting ended with a conspicuous lack of any statement beyond formal protocol and a source in the Kremlin told Russian news agencies yesterday that Ukraine was acting out of line.
The official accused Kiev of trying to politicise the gas dispute and flatly rejected the idea of Ukraine getting special privileges instead of formally joining an economic union Russia has formed with Belarus and Kazakhstan.
“The Russian side underscored the need to follow the existing agreement on gas cooperation and not to politicise the issue,” the unnamed Kremlin source said.
The official added that Ukraine could only join the Russian-led customs union “as a full-fledged participant” and not as a special member who could also negotiate special trade terms with the European Union.
Sources and Russian press reports said Medvedev’s talks with Yanukovych were originally supposed to have taken place on July 31 in Ukraine but the Kremlin scrapped the visit due to the tensions.
The last gas conflict ended when Ukraine in 2009 signed a 10-year gas supply contract with Russia’s Gazprom that it is now trying to re-negotiate because it is being charged more than some richer European states.
An official in Kiev firmly told the Kommersant business daily: “We are morally preparing for a possible repeat of the gas war.”
But the meeting ended with a conspicuous lack of any statement beyond formal protocol and a source in the Kremlin told Russian news agencies yesterday that Ukraine was acting out of line.
The official accused Kiev of trying to politicise the gas dispute and flatly rejected the idea of Ukraine getting special privileges instead of formally joining an economic union Russia has formed with Belarus and Kazakhstan.
“The Russian side underscored the need to follow the existing agreement on gas cooperation and not to politicise the issue,” the unnamed Kremlin source said.
The official added that Ukraine could only join the Russian-led customs union “as a full-fledged participant” and not as a special member who could also negotiate special trade terms with the European Union.
Sources and Russian press reports said Medvedev’s talks with Yanukovych were originally supposed to have taken place on July 31 in Ukraine but the Kremlin scrapped the visit due to the tensions.
The last gas conflict ended when Ukraine in 2009 signed a 10-year gas supply contract with Russia’s Gazprom that it is now trying to re-negotiate because it is being charged more than some richer European states.
An official in Kiev firmly told the Kommersant business daily: “We are morally preparing for a possible repeat of the gas war.”
Friday, 17 June 2011
Will Kiev Seek Alternatives To Russian Gas Or Make Concessions To Moscow?
WASHINGTON, DC -- Kiev’s recent attempt to persuade Moscow to lower the price of gas for Ukraine proved to be a fiasco.
Russian Prime Minister, Vladimir Putin, made it clear to his visiting Ukrainian counterpart Mykola Azarov on June 7 that Moscow was happy with the current situation when the global growth of energy prices makes Russian gas more expensive each quarter.
Putin hinted that Moscow could make concessions if Kiev agreed to either join the Moscow-dominated Customs Union or merge the national oil and gas company Naftohaz Ukrainy with Gazprom. There are two scenarios for Kiev: either accepting Moscow’s conditions or explore alternatives to Russian gas.
Judging by recent statements of Ukrainian officials, Azarov’s fiasco prompted Kiev to move from words to action as far as alternatives to Russian gas are concerned.
“We are making very serious efforts [to obtain] gas supplies from other countries,” Azarov told an economic forum in Vienna last week.
Azarov said that this year Ukraine would launch a liquefied natural gas (LNG) terminal project whose capacity should reach 10 billion cubic meters (bcm) of gas per annum and that Ukraine was in talks on gas supplies with Central Asian countries.
Vladyslav Kaskiv, the head of the State Agency for Investment and National Projects, said on a visit to the US that the LNG terminal was a matter of national security as Russia refused to lower the price of gas.
Kaskiv said that he discussed the project with Exxon Mobil, Halliburton and Chevron and that Kiev would accept bids to conduct feasibility studies by the end of June.
Azarov and Kaskiv announced plans to build the terminal on the Black Sea last year.
The plan is to receive tankers with LNG from Azerbaijan which last January in Davos agreed to supply 7 bcm of LNG to Ukraine in 2014-2015, when Kiev plans to launch the first stage of the terminal.
However, it is not clear whether Azerbaijan can guarantee stable supplies and if not, where Ukraine will buy LNG.
The issue of Central Asian gas is even more complicated. Ukrainian Coal and Energy Minister, Yury Boyko, reportedly asked Gazprom to allow Ukraine to buy 25-30 bcm of gas from Central Asia at $200 to $220 per 1,000 cubic meters of gas compared to $350 which Ukraine is expected to pay Gazprom in the third quarter of this year.
If Russia did not allow the transit of Central Asian gas to Ukraine through its territory, Boyko threatened to raise transit fees for Russian gas pumped to Europe through Ukraine’s pipelines.
However, Putin reminded Azarov that stable gas transit fees were part of the January 2009 gas agreement so Russia could retaliate by further raising prices if Ukraine raised the fees.
Ukraine pins hopes also on its own resources.
Kiev has been in talks with multinationals such as Exxon Mobil and Chevron to explore shale gas deposits in Ukraine, and last February Boyko signed documents in the US according to which Ukraine will share information on its unconventional gas reserves with the US in order to assess how much unconventional gas it has.
Ukraine is about to boost oil and gas extraction in the Black Sea basin.
Chornomornaftohaz, a branch of Naftohaz Ukrainy, early this year acquired a rig for deep drilling with which Chornomornaftohaz hopes to almost double its gas extraction to 1.8 bcm by 2015.
The government also plans to boost the share of renewable energy sources such as wind and solar energy in the energy balance from some 0.5 percent to 10 percent by 2015.
Although all these measures should reduce Ukraine’s dependence on Russian gas, they have significant drawbacks.
First, even if most of them are implemented, dependence on Russian gas will hardly be reduced significantly because Ukraine has to import too much gas, 35 bcm to 45 bcm per annum.
Second, this will take years to implement while Ukraine has to cope with high gas prices now. For example, the planned LNG terminal would start working at full capacity only by 2020.
Third, Ukraine needs considerable investment to develop alternative sources. The government will pay $400 million for the oil rig for Chornomornaftohaz, the LNG terminal should cost at least $1.5 billion, and the state renewable energy program costs some $1 billion this year alone.
By contrast, Ukraine stands to lose “only” $1.1 billion to $1.2 billion this year as a result of the steep Russian gas price growth, which was not expected last year when the state budget was drafted.
In this situation, Ukraine will either swallow the pill and continue paying Gazprom according to the 2009 contract, hoping that energy prices will fall next year or make a major concession to Russia.
Ukraine will hardly join the Customs Union as this would derail its free trade talks with the European Union, which are close to completion.
The Segodnya daily, which is close to Ukraine’s ruling Party of Regions, suggested on June 14 that Gazprom will be offered some share in Ukraine’s gas pipelines, a scenario which different Ukrainian governments have opposed for years.
Putin hinted that Moscow could make concessions if Kiev agreed to either join the Moscow-dominated Customs Union or merge the national oil and gas company Naftohaz Ukrainy with Gazprom. There are two scenarios for Kiev: either accepting Moscow’s conditions or explore alternatives to Russian gas.
Judging by recent statements of Ukrainian officials, Azarov’s fiasco prompted Kiev to move from words to action as far as alternatives to Russian gas are concerned.
“We are making very serious efforts [to obtain] gas supplies from other countries,” Azarov told an economic forum in Vienna last week.
Azarov said that this year Ukraine would launch a liquefied natural gas (LNG) terminal project whose capacity should reach 10 billion cubic meters (bcm) of gas per annum and that Ukraine was in talks on gas supplies with Central Asian countries.
Vladyslav Kaskiv, the head of the State Agency for Investment and National Projects, said on a visit to the US that the LNG terminal was a matter of national security as Russia refused to lower the price of gas.
Kaskiv said that he discussed the project with Exxon Mobil, Halliburton and Chevron and that Kiev would accept bids to conduct feasibility studies by the end of June.
Azarov and Kaskiv announced plans to build the terminal on the Black Sea last year.
The plan is to receive tankers with LNG from Azerbaijan which last January in Davos agreed to supply 7 bcm of LNG to Ukraine in 2014-2015, when Kiev plans to launch the first stage of the terminal.
However, it is not clear whether Azerbaijan can guarantee stable supplies and if not, where Ukraine will buy LNG.
The issue of Central Asian gas is even more complicated. Ukrainian Coal and Energy Minister, Yury Boyko, reportedly asked Gazprom to allow Ukraine to buy 25-30 bcm of gas from Central Asia at $200 to $220 per 1,000 cubic meters of gas compared to $350 which Ukraine is expected to pay Gazprom in the third quarter of this year.
If Russia did not allow the transit of Central Asian gas to Ukraine through its territory, Boyko threatened to raise transit fees for Russian gas pumped to Europe through Ukraine’s pipelines.
However, Putin reminded Azarov that stable gas transit fees were part of the January 2009 gas agreement so Russia could retaliate by further raising prices if Ukraine raised the fees.
Ukraine pins hopes also on its own resources.
Kiev has been in talks with multinationals such as Exxon Mobil and Chevron to explore shale gas deposits in Ukraine, and last February Boyko signed documents in the US according to which Ukraine will share information on its unconventional gas reserves with the US in order to assess how much unconventional gas it has.
Ukraine is about to boost oil and gas extraction in the Black Sea basin.
Chornomornaftohaz, a branch of Naftohaz Ukrainy, early this year acquired a rig for deep drilling with which Chornomornaftohaz hopes to almost double its gas extraction to 1.8 bcm by 2015.
The government also plans to boost the share of renewable energy sources such as wind and solar energy in the energy balance from some 0.5 percent to 10 percent by 2015.
Although all these measures should reduce Ukraine’s dependence on Russian gas, they have significant drawbacks.
First, even if most of them are implemented, dependence on Russian gas will hardly be reduced significantly because Ukraine has to import too much gas, 35 bcm to 45 bcm per annum.
Second, this will take years to implement while Ukraine has to cope with high gas prices now. For example, the planned LNG terminal would start working at full capacity only by 2020.
Third, Ukraine needs considerable investment to develop alternative sources. The government will pay $400 million for the oil rig for Chornomornaftohaz, the LNG terminal should cost at least $1.5 billion, and the state renewable energy program costs some $1 billion this year alone.
By contrast, Ukraine stands to lose “only” $1.1 billion to $1.2 billion this year as a result of the steep Russian gas price growth, which was not expected last year when the state budget was drafted.
In this situation, Ukraine will either swallow the pill and continue paying Gazprom according to the 2009 contract, hoping that energy prices will fall next year or make a major concession to Russia.
Ukraine will hardly join the Customs Union as this would derail its free trade talks with the European Union, which are close to completion.
The Segodnya daily, which is close to Ukraine’s ruling Party of Regions, suggested on June 14 that Gazprom will be offered some share in Ukraine’s gas pipelines, a scenario which different Ukrainian governments have opposed for years.
Saturday, 11 December 2010
Ukraine And Poland To Revive Odessa-Brody Pipeline
KIEV, Ukraine -- The Prime Minister of Ukraine Mykola Azarov and the Marshal of the Polish Senate Bogdan Borusevich discussed the plans of the two countries to revive the use of the Odessa-Brody pipeline.
The high officials also mentioned a possibility of constructing a new leg of the pipeline. Presumably, it will stretch all the way to the Northern Polish city of Gdansk, and thus will make one step forward towards the establishment of a new route to transport the Caspian oil to the EU countries.
During his meeting with Mykola Azarov, Bogdan Borusevich stated that he considers the stretching of the Odessa-Brody pipeline to Gdansk, Poland, being prospective. Borusevich mentioned that realization of the project will become ever more relevant for Poland now that oil transfers through Druzhba pipeline might get reduced.
Druzhba is the world's largest pipeline system carrying oil from European Russia through Ukraine, Belarus, Poland, Hungary, Slovakia, Czech Republic, and Germany. Marshal also pointed out that Polish investors have purchased oil refinery in Lithuania.
In this respect there is a possibility to build a branch of the Odesa-Brody pipeline to the refinery.
"The Ukrainian side has already built its part of the pipeline, but Poland, unfortunately, has not", Borusevich added. "I was pleased to hear that Azarov's government is interested in the Polish-Ukrainian cooperation on this and other projects in the field of energy security".
On November 23, 2010, the Ukrtransnafta company completed the testing of the Odesa-Brody pipeline in the direction of Druzhba's southern branch. In 2009, a Polish pipeline company Sarmatia made a prediction that the construction of the conduct pipe in question would reach Plotsk and Gdansk before 2012.
The Odesa-Brody pipeline is a crude oil pipeline between the Ukrainian cities of Odesa on the Black Sea, and Brody near the Ukrainian-Polish border.
The usage and the direction of the Odessa-Brody pipeline is viewed to be of considerable geopolitical significance, since it provides a new route to diversify oil supplies to the EU.
The pipeline was originally intended to reach Gdansk in order to transfer oil from the Caspian Sea (mainly from Kazakhstan) to the Polish Baltic Sea port and from there to the rest of Europe.
The high officials also mentioned a possibility of constructing a new leg of the pipeline. Presumably, it will stretch all the way to the Northern Polish city of Gdansk, and thus will make one step forward towards the establishment of a new route to transport the Caspian oil to the EU countries.
During his meeting with Mykola Azarov, Bogdan Borusevich stated that he considers the stretching of the Odessa-Brody pipeline to Gdansk, Poland, being prospective. Borusevich mentioned that realization of the project will become ever more relevant for Poland now that oil transfers through Druzhba pipeline might get reduced.
Druzhba is the world's largest pipeline system carrying oil from European Russia through Ukraine, Belarus, Poland, Hungary, Slovakia, Czech Republic, and Germany. Marshal also pointed out that Polish investors have purchased oil refinery in Lithuania.
In this respect there is a possibility to build a branch of the Odesa-Brody pipeline to the refinery.
"The Ukrainian side has already built its part of the pipeline, but Poland, unfortunately, has not", Borusevich added. "I was pleased to hear that Azarov's government is interested in the Polish-Ukrainian cooperation on this and other projects in the field of energy security".
On November 23, 2010, the Ukrtransnafta company completed the testing of the Odesa-Brody pipeline in the direction of Druzhba's southern branch. In 2009, a Polish pipeline company Sarmatia made a prediction that the construction of the conduct pipe in question would reach Plotsk and Gdansk before 2012.
The Odesa-Brody pipeline is a crude oil pipeline between the Ukrainian cities of Odesa on the Black Sea, and Brody near the Ukrainian-Polish border.
The usage and the direction of the Odessa-Brody pipeline is viewed to be of considerable geopolitical significance, since it provides a new route to diversify oil supplies to the EU.
The pipeline was originally intended to reach Gdansk in order to transfer oil from the Caspian Sea (mainly from Kazakhstan) to the Polish Baltic Sea port and from there to the rest of Europe.
Monday, 6 September 2010
Now Or Never For Ukraine's Gas Transit Pipelines
BRUSSELS, Belgium -- The Nord Stream gas pipeline, which aims to bring Siberian gas directly to Germany under the Baltic Sea bypassing Ukraine, makes Kiev uneasy.
German Chancellor Angela Merkel and Ukrainian President Viktor Yanukovych pledged to work together to modernize transit gas pipelines in the former Soviet republic, a move that could make other future bypasses like South Stream and Nabucco unnecessary and ensure uninterrupted Russian gas supplies to the EU.
Yanukovych told the German Chancellor that Ukraine felt compelled to ensure stable gas deliveries to Europe. In turn, Merkel said Germany could help restructure the Ukrainian gas market. Viacheslav Kniazhnytskyi, Ambassador-at-large for Energy Security at the Ministry for Foreign Affairs of Ukraine, told New Europe by phone on 2 September the involvement of a particular country is not the issue.
“We need companies from countries and we started inviting interested companies from any country – Russia, United States, Japan, Canada, Germany, Holland – anyone who would be able to compete in the bids. It’s not a political issue; it is the capability of a particular company to offer the best options for the modernization,” he said.
The European Commission said it could not comment on media reports at the occasion of Yanukovych recent visit to Berlin. “But we do take note that European companies are apparently ready to invest in the modernization of Ukraine's gas transit systems.
This is perfectly in line with the EU approach and very much welcome, bearing in mind that it will be for each company to decide according to its own company interests,” the Commission said in an e-mailed response to a question from New Europe on 2 September.
In March 2009, the Commission jointly hosted with Ukraine an international conference on the modernization of the Ukrainian Gas Transit System at which a joint declaration was signed in the presence of European Commission President Jose Manuel Barroso and, Moscow’s nemesis, then-Ukrainian President Viktor Yushchenko.
The election of Yanukovych to Ukraine’s presidential post in February 2010 has greatly improved relations between Moscow and Kiev and Russia has also warmed up to the idea of upgrading the Ukrainian transit pipelines.
In the March 2009 declaration the International Financial Institutions committed to providing loans to upgrade Ukraine’s pipes. The Commission noted, however, that the success of this initiative ultimately lies in Ukraine's readiness to implement the agreed gas sector reform conditions.
The EBRD, EIB and World Bank are seeking to mobilize up to €2 billion for investment in the gas transit structure of Ukraine. Kniazhnytskyi said the process is on the right track. International financial organizations are working with Ukrainian entities and they are preparing feasibility studies, he said, adding that the selected projects to be prepared for tenders could be announced by the end of 2010.
Moreover, Ukraine now has European legislation in gas. Yanukovych in July 2010 signed a law on principles of the functioning of the natural gas market, which had been adopted by Ukraine’s parliament earlier that month.
The law is in compliance with EU Directive 55 and its primary goal is the liberalization of the Ukrainian natural gas market. “Another gate opened for modernization and for investments to come. This opens us the way to the Energy Community Treaty,” Kniazhnytskyi said.
Friday, 30 July 2010
EU Commissioner Says Russia Gas Transits To Europe Best Via Ukraine
KIEV, Ukraine -- Transits via Ukraine remain the most reliable means of transporting Russian gas to Europe, EU Energy Commissioner Gunther Oettinger said on Wednesday.
"It is a direct route and it provides the highest technical reliability," Oettinger said during a meeting with Ukrainian Prime Minister Mykola Azarov in Kiev.
"We are now in a dialogue about how best to invest in Ukraine's transport system... and how this investment may make the best business-plan for the future, more successful than South Stream," he said.
Ukraine is interested in modernizing its transport system and is ready to invest in the project, Azarov said.
"However, we must have guarantees that the EU will buy certain gas volumes from Russia, which will then be transported through our territory," he said.
Oettinger also said Ukraine may join the European Energy Community within 12 months. The community's meeting in 2009 approved Ukraine's membership of the organization on the condition it bring its gas laws closer to EU standards.
Some issues remained to be resolved, he said.
Azarov, however, said that Ukraine had met the membership conditions after passing the relevant law in early July.
The commissioner said the European Commission would consider the law within a week.
Ukraine currently transits 80% of Russian gas to Europe. It has been trying to persuade Russia to give up the South Stream project over fears that it will see a serious decline in gas volumes transited through its territory.
South Stream will deliver Russian gas to Western Europe bypassing Ukraine. The offshore part, operated by Russia's energy giant Gazprom and Italy's ENI, will run from Russia's mainland under the Black Sea to the Bulgarian coast.
The launch of the gas pipeline is scheduled for December 2015.
"It is a direct route and it provides the highest technical reliability," Oettinger said during a meeting with Ukrainian Prime Minister Mykola Azarov in Kiev.
"We are now in a dialogue about how best to invest in Ukraine's transport system... and how this investment may make the best business-plan for the future, more successful than South Stream," he said.
Ukraine is interested in modernizing its transport system and is ready to invest in the project, Azarov said.
"However, we must have guarantees that the EU will buy certain gas volumes from Russia, which will then be transported through our territory," he said.
Oettinger also said Ukraine may join the European Energy Community within 12 months. The community's meeting in 2009 approved Ukraine's membership of the organization on the condition it bring its gas laws closer to EU standards.
Some issues remained to be resolved, he said.
Azarov, however, said that Ukraine had met the membership conditions after passing the relevant law in early July.
The commissioner said the European Commission would consider the law within a week.
Ukraine currently transits 80% of Russian gas to Europe. It has been trying to persuade Russia to give up the South Stream project over fears that it will see a serious decline in gas volumes transited through its territory.
South Stream will deliver Russian gas to Western Europe bypassing Ukraine. The offshore part, operated by Russia's energy giant Gazprom and Italy's ENI, will run from Russia's mainland under the Black Sea to the Bulgarian coast.
The launch of the gas pipeline is scheduled for December 2015.
Wednesday, 14 July 2010
Ukraine Sets Higher Gas Price For Homes To Avert Naftogaz Losses
KIEV, Ukraine -- Ukraine will have to raise the prices utilities and households pay for natural gas to protect state-run energy company NAK Naftogaz Ukrainy from losses, Deputy Prime Minister Serhiy Tigipko said.
The country “cannot make it without increases in the rates” households pay, Tigipko told reporters today before the weekly government meeting in Kiev. The poor will be compensated for the increases, Tigipko said.
NAK Naftogaz Ukrainy will have a deficit of 10 billion hryvnia ($1.27 billion) this year, compared with 30 billion hryvnia in 2009, Tigipko said. “We cannot leave Naftogaz loss making,” he said.
Ukraine promised to raise its utility tariffs and prices paid by households to qualify for a new loan program with the International Monetary Fund. The government will today approve a memorandum with the Washington-based lender, Prime Minister Mykola Azarov said today.
The nation’s National Commission for Energy Regulation decided yesterday to double from Aug. 1 the price households pay for gas, according to its website. Utility companies will pay 1,309.2 hryvnia per 1,000 cubic meters compared with 873 hryvnia as set in late 2008.
“Social protection” will follow the rate increase, which will “gradually bring prices close to real cost,” Azarov said today.
The government will compensate families if their utility bills are in excess of 15 percent of family income, if there is a working family member, and 10 percent for families without working members, Azarov said.
The country “cannot make it without increases in the rates” households pay, Tigipko told reporters today before the weekly government meeting in Kiev. The poor will be compensated for the increases, Tigipko said.
NAK Naftogaz Ukrainy will have a deficit of 10 billion hryvnia ($1.27 billion) this year, compared with 30 billion hryvnia in 2009, Tigipko said. “We cannot leave Naftogaz loss making,” he said.
Ukraine promised to raise its utility tariffs and prices paid by households to qualify for a new loan program with the International Monetary Fund. The government will today approve a memorandum with the Washington-based lender, Prime Minister Mykola Azarov said today.
The nation’s National Commission for Energy Regulation decided yesterday to double from Aug. 1 the price households pay for gas, according to its website. Utility companies will pay 1,309.2 hryvnia per 1,000 cubic meters compared with 873 hryvnia as set in late 2008.
“Social protection” will follow the rate increase, which will “gradually bring prices close to real cost,” Azarov said today.
The government will compensate families if their utility bills are in excess of 15 percent of family income, if there is a working family member, and 10 percent for families without working members, Azarov said.
Wednesday, 23 June 2010
Kiev To Take Up Gas Slack From Belarus?
KIEV, Ukraine, June 22 -- Ukraine can transport more Russian natural gas bound for European costumers if a gas row with Belarus causes supply disruptions, the state energy company said.
Moscow said Belarus owes Russian gas company Gazprom millions in gas payments for supplies from the first four months of the year. Minsk says Gazprom owes a similar amount for gas transit fees.
A Russian gas pipeline through Belarus supplies Germany, Poland and Lithuania. Redirecting gas from Belarus through Ukraine could ally supply concerns, the Platts news service reports.
Moscow, Platts said, asked Kiev last week to stand by for possible additional gas supplies if the gas dispute with Belarus drags on.
Ukraine's state-owned energy company Naftogaz said it was ready for emergency shipments but has so far not seen any additional gas from Russia.
Around 80 percent of all Russian gas bound for European markets travels through Soviet-era pipelines in Ukraine. The remaining 20 percent runs through Belarus.
Gazprom said it would gradually cut gas supplies to Belarus by as much as 85 percent if the dispute lingers.
The Russian energy company cut gas supplies to Ukraine most recently in 2009 over a similar issue.
Moscow said Belarus owes Russian gas company Gazprom millions in gas payments for supplies from the first four months of the year. Minsk says Gazprom owes a similar amount for gas transit fees.
A Russian gas pipeline through Belarus supplies Germany, Poland and Lithuania. Redirecting gas from Belarus through Ukraine could ally supply concerns, the Platts news service reports.
Moscow, Platts said, asked Kiev last week to stand by for possible additional gas supplies if the gas dispute with Belarus drags on.
Ukraine's state-owned energy company Naftogaz said it was ready for emergency shipments but has so far not seen any additional gas from Russia.
Around 80 percent of all Russian gas bound for European markets travels through Soviet-era pipelines in Ukraine. The remaining 20 percent runs through Belarus.
Gazprom said it would gradually cut gas supplies to Belarus by as much as 85 percent if the dispute lingers.
The Russian energy company cut gas supplies to Ukraine most recently in 2009 over a similar issue.
Monday, 21 June 2010
Ukraine Wishes South Stream ‘Peaceful Death’
KIEV, Ukraine -- South Stream, a gas pipeline backed by Moscow that would allow Gazprom to sell gas directly to Europe while bypassing Ukraine, has lost its raison d’être since Kiev started to normalise relations with Russia, according to one of the country's top advisers
Andriy Fialko, foreign policy advisor to the president of Ukraine, said he wanted the project "to peacefully die".
Speaking at a round table organised by the European Policy Centre (EPC) on Friday (18 June), he said South Stream would represent a key test for Ukraine-Russia relations.
The new Ukrainian leadership sees itself as a strategic partner for Russia and it would make no sense for Gazprom not to use Ukraine's gas pipeline infrastructure, Fialko explained.
Referring to the South Stream project, he said it was "disappointing" to see "other strategic partners" strike deals which harmed Ukraine's interest without first consulting Kiev.
He added that the same applied to Nord Stream, an undersea pipeline bringing gas directly from Russia to Germany, the construction of which began recently (EurActiv 08/04/10), as well as "other projects".
Asked by EurActiv what Kyiv would do if Russia were to go ahead with the construction of South Stream, Fialko said: "I think one can safely say that it will seriously affect the readiness to go ahead with certain bilateral projects, if this is not addressed."
Asked to name such projects, he said he would not do so at the moment. Such projects were discussed, but for the time being, the question was hypothetical, he said.
"Our hope is that South Stream will peacefully die," he said.
Asked if Kiev had received indications from the Russian side that the pipeline could be scrapped, he said that this was not the case, but "financial realities" and developments such as the oil spill in the Gulf of Mexico could help to change Moscow's mind.
Fialko also indicated that the EU had a serious stake in the gamble, as Ukraine had an agreement with the Union to upgrade its gas transportation system. However, he said there was no commitment from the EU side or the Russian side as to how much gas would be pumped through that system.
"It would be a very extravagant exercise, particularly under the current economic situation, to invest two or three billion dollars in upgrading dramatically this potential, with the result of having 40% less gas pumped through. So we need reassurances from both sides, and this is not a caprice, but a necessity," concluded the policy adviser to the Ukrainian president.
Andriy Fialko, foreign policy advisor to the president of Ukraine, said he wanted the project "to peacefully die".
Speaking at a round table organised by the European Policy Centre (EPC) on Friday (18 June), he said South Stream would represent a key test for Ukraine-Russia relations.
The new Ukrainian leadership sees itself as a strategic partner for Russia and it would make no sense for Gazprom not to use Ukraine's gas pipeline infrastructure, Fialko explained.
Referring to the South Stream project, he said it was "disappointing" to see "other strategic partners" strike deals which harmed Ukraine's interest without first consulting Kiev.
He added that the same applied to Nord Stream, an undersea pipeline bringing gas directly from Russia to Germany, the construction of which began recently (EurActiv 08/04/10), as well as "other projects".
Asked by EurActiv what Kyiv would do if Russia were to go ahead with the construction of South Stream, Fialko said: "I think one can safely say that it will seriously affect the readiness to go ahead with certain bilateral projects, if this is not addressed."
Asked to name such projects, he said he would not do so at the moment. Such projects were discussed, but for the time being, the question was hypothetical, he said.
"Our hope is that South Stream will peacefully die," he said.
Asked if Kiev had received indications from the Russian side that the pipeline could be scrapped, he said that this was not the case, but "financial realities" and developments such as the oil spill in the Gulf of Mexico could help to change Moscow's mind.
Fialko also indicated that the EU had a serious stake in the gamble, as Ukraine had an agreement with the Union to upgrade its gas transportation system. However, he said there was no commitment from the EU side or the Russian side as to how much gas would be pumped through that system.
"It would be a very extravagant exercise, particularly under the current economic situation, to invest two or three billion dollars in upgrading dramatically this potential, with the result of having 40% less gas pumped through. So we need reassurances from both sides, and this is not a caprice, but a necessity," concluded the policy adviser to the Ukrainian president.
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