EU: Reverse gas flows to Ukraine by 2014

Sept. 24, 2012 at 6:30 AM
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BRUSSELS, Sept. 24 (UPI) -- Improvements needed to transmit natural gas from Europe to Ukraine for the first time could be finished by mid-2014, EU Energy Minister Gunter Oettinger says.

Oettinger, speaking Friday after a meeting in Brussels with Ukrainian Energy and Coal Industry Minister Yuriy Boyko, said a reverse-flow border gas crossing into Ukraine from Slovakia could be ready in less than two years, Interfax reported.

If completed, it would represent the first attempt by Ukraine to reduce its dependence on imports from Russia's Gazprom monopoly.

Using reverse-flow technology, Russian gas supplied by Germany's RWE could be sent into Ukraine -- the opposite of the normal flow of Russian natural gas through Ukraine to European customers.

"We need some time (to settle technical issues of the deliveries) but we think that the reverse supplies may be ready by mid-2014," Oettinger said.

Ukraine's state-controlled oil and gas monopoly Naftogaz in May signed an agreement with RWE creating a legal framework for the possible importation of natural gas supplies from RWE -- a deal that wouldn't contain binding purchase or supply commitments, such as required by Gazprom.

News of the framework agreement came after Ukrainian Prime Minister Mykola Azarov in March told the German newspaper Die Welt that if Ukraine can't reach an agreement with Gazprom on renegotiating its current gas contract, it could buy Russian gas from RWE through reverse flows.

He said Gazprom is charging Ukraine so much for gas that buying it from the German company would be cheaper than getting it directly from Russia.

"This would be a paradox," he said, adding that even though Ukraine buys much more Russian gas than Germany does, "at the same time it has to pay a much higher price, although our economic indices are much lower than in Germany.

"Can you imagine what is going on with such an unfair price? We are trying to save energy. We withdraw funds from other spheres, for instance, the social sector. We had to pay $1.2 billion for Russian gas over the recent month. We have paid it."

Oettinger cautioned Friday that Russia remains the "most important partner" on the gas market for the European Union and the Ukraine and the two remain committed to working with Gazprom, Interfax said.

"But," he added, "our domestic market and our energy policy show the need to diversify the gas marker. This means diversifying supply routes and resources. Reverse supplies are a key resource of the European gas market at large."

British energy analysts ICIS Heren reported that under the deal, the Ukraine-to-EU gas flow could be virtually reversed through the Slovak-Ukrainian border point at Velke Kapusany. Slovak transmission system operator Eustream has said this is technically possible.

While the volumes under discussion are be small -- reportedly covering around 3 million cubic meters per day -- its implication as a bargaining chip in Ukraine's ongoing pricing dispute with Gazprom could be significant, the analysts said.

Naftogaz has said it is paying around $425 per cubic kilometer for natural gas, which Ukraine says is too high. Azarov has said his country will reduce imports of Russian gas from 52 billion cubic meters to 27 bcm in 2012 but Gazprom has insisted its "take-or-pay" supply contract is valid.

Under that deal, Ukraine cannot decline delivery of any more that 20 percent of the contracted 52 billion cubic meters without paying for it.

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