Ukraine imports gas from
Europe By Oleg Varfolomeyev
As Russia refuses to cut gas prices for
Ukraine and proceeds with its South Stream
pipeline project - aimed at diminishing Gazprom's
dependence on Ukrainian gas pipelines - Ukraine
has announced plans to further cut Russian gas
imports. Even more notably, Ukraine began buying
gas from the German company RWE this month.
The Ukrainian government believes this
will allow the country to cut Russian gas imports
by some 4% this year and by more than
16% next year. Ukraine is
also buying another two deep-water drilling rigs
in order to boost gas extraction in the Black Sea.
RWE has been pumping gas to Ukraine via
Poland since November 1, according to agreements
signed in May and October. RWE's price is lower
than the US$430 that the national oil and gas
company Naftohaz Ukrainy is paying Gazprom this
quarter per 1,000 cubic meters of gas. This is
because both Russia's price for Germany and gas
prices on the spot markets in Europe are lower
than Gazprom's price for Ukraine.
RWE is
going to deliver five billion cubic meters (bcm)
of gas to Ukraine by May 2013. Both Naftohaz and
RWE plan to renew their contract, and Ukraine
hopes to receive eight bcm of gas from RWE next
year. Citing Ukrainian experts, the Russian news
agency RBC said on November 7 that RWE's gas will
cost Ukraine $380 - $390 per 1,000 cubic meters.
Ukrainian Energy Minister Yury Boyko said that
RWE's price was $40 - $70 lower than Gazprom's and
that the difference would rise to $100 by next
summer.
Ukraine has not previously
imported gas from Europe. The breakthrough with
RWE prompted Naftohaz deputy head Vadym Chuprun to
announce that gas imports from Russia would be cut
to 20 bcm next year from the earlier announced 24
bcm. He said Ukraine could in theory import gas
from Europe not only through Poland but also
through Slovakia, Romania and Bulgaria.
Energy Minister Boyko said in June that
Naftohaz would cut gas imports from Russia this
year to 27 bcm from the 40 bcm imported last year,
and in September he said Naftohaz would cut
imports from Russia further to 24.5 bcm of gas
next year.
Speaking after Chuprun last
Friday, Boyko said that thanks to RWE's deliveries
already this year, Ukraine would cut gas imports
from Russia further to 26 bcm. He said RWE's gas
would be imported not only from the Polish border,
but also from Hungary starting on January 1, 2013.
The January 2009 contract signed with Gazprom
obligates Naftohaz to import at least 41.6 bcm of
Russian gas per annum until 2019.
According to a take-or-pay clause in the
contract, Ukraine has to pay for that amount of
gas even if it imports less. However, Boyko said
Ukraine would pay for no more than it physically
imports. Boyko said Ukraine was ready to go to
court if Gazprom sued.
He noted that
Gazprom recently lost several disputes over prices
to its European customers. Gazprom, which faces a
European Union inquiry into its contracts, lost in
disputes over prices to companies from Germany,
Italy, France and Poland over the past several
months as the local gas market is reshaped by a
boom in non-traditional gas. This must have
inspired Ukraine.
In order to diminish
dependence on Russian gas, along with importing
gas from Europe, Ukraine is starting construction
of an LNG terminal with a capacity of 10 bcm of
gas per annum near Odessa this month. It should be
ready by 2018. Moreover, Ukraine is planning to
replace gas with coal at several cogeneration
plants with the help of Chinese loans, and the
country will introduce new energy saving
technologies.
Ukraine invited Chevron and
Shell to prospect for unconventional shale gas,
and a consortium led by ExxonMobil last August was
awarded the right to explore an oil and gas field
in the Black Sea.
Domestic gas output,
currently at some 20 bcm per annum while Ukraine
consumes over 50 bcm, is also set to rise. Ukraine
pins special hopes on its Black Sea deposits,
which are yet to be explored. This year and last,
Ukraine bought two deep-water drilling rigs for
Naftohaz's Black Sea subsidiary,
Chornomornaftohaz. On November 16, the Singaporean
company Keppel won a tender to deliver two
drilling rigs to Ukraine for $1.2 billion, which
is less than the $1.4 billion Naftohaz was ready
to pay.
Boyko said last September that a
total of five deep-water drilling rigs would be
used in the Black Sea so one more remains to be
bought. Chornomornaftogaz is going to triple its
output to three bcm per annum by 2015 compared to
2011. However, this has failed to change Russia's
position in the gas price dispute, which has been
continuing since last year. Despite Ukraine's
robust energy savings and diversification plans,
the head of Gazprom's foreign economic department,
Pavel Oderov, said recently that Gazprom did not
see reasons to cut prices for Ukraine.
Oleg Varfolomeyev is a
journalist based in Kyiv, Ukraine. He covers
economic and political developments in Ukraine and
Belarus for analytical network CEEMarketWatch and
also writes regularly for a number of other
Western sources. He received a Master's degree in
Political Science from Central European University
in Budapest, Hungary.
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