Ukraine Will Struggle to Boost EU Gas Imports

Ukraine Will Struggle to Boost EU Gas ImportsUkraine Will Struggle to Boost EU Gas Imports

Ukraine will struggle with its plan to boost natural gas imports from Europe, leaving the nation with limited options to meet demand this winter after more than four months without gas from Russia.

European Union nations probably won’t supply enough gas via so-called reverse flows to meet Ukraine’s demand and exports would stop if there were shortages in the bloc, the Oxford Institute of Energy Studies (OIES) said.

Ukraine is working with Europe to boost deliveries from Slovakia as it seeks to meet the shortfall, according to Andriy Kobolyev, chief executive officer of NAK Naftogaz Ukrainy. Russia’s OAO Gazprom, which says Ukraine owes it $5.3 billion for past supply and that reverse flows violate transit contracts, limited volumes to EU countries including Poland last month, reducing the bloc’s ability to sell fuel to Ukraine.

Ukraine, which consumes 50 billion cubic meters (1.7 trillion cubic feet) of gas a year and produces about 18 billion, could suffer “serious energy shortages” unless it resolves its dispute with Russia or increases EU imports, the OIES said in a report, cited by Bloomberg. Reverse flows are limited to 15 billion cubic meters a year in 2014-15, it said.

 “The easiest solution for all of us would be to unlock full reverse flows from Slovakia” to meet the shortfall of 5 billion cubic meters this winter, Kobolyev said in an interview at the FT European Gas Conference on Oct. 23. That would help Ukraine and “create a separate route of gas supply to Hungary, Romania and Bulgaria, countries that may be affected the most if there’s a cut off of Russian gas to Europe.”

Russia supplies about 30 percent of Europe’s gas, half of which through pipelines crossing Ukraine. Disputes between the two nations disrupted flows to Europe in 2006 and 2009 amid freezing weather.

Yuri Prodan, Ukraine’s energy minister, will seek an interim deal when he meets his Russian counterpart Alexander Novak and EU Energy Commissioner Guenther Oettinger. There’s a 60 percent chance Russia and Ukraine won’t reach an agreement, according to New York-based risk consultants Eurasia Group.

Naftogaz says it has $3.1 billion to pay Russia and Ukraine asked the EU for a $2 billion loan to help pay its gas bill. The bloc is unlikely to provide the full amount, Eurasia said. Ukraine is still seeking more financing to buy gas this winter, Shlapak said.