Ukraine preparing to cut gas consumption, not relying on renewed talks

Ukrainians should be prepared to limit domestic consumption of natural gas, PM Arseniy Yatsenyuk told an open Cabinet meeting on Sept. 23, the Interfax news agency reported. He said he assumes the next trilateral meeting with Russian and EU officials, preliminary scheduled for Sept. 26, will be as fruitless as all the previous talks, as Russia is not willing to provide any concessions regarding gas pricing.



EU Energy Commissioner Gunther Oettinger voiced his intention to find an interim solution to the gas dispute between Ukraine and Russia at the upcoming meeting, as cited by Interfax-Ukrayina. He suggested that Ukraine buy gas from Russia at an interim price, before the dispute is resolved in the Stockholm Arbitration Court. He provided no details on what this interim price should be.



According to Ukraine’s Energy Minister Yuriy Prodan, Ukraine’s total demand for natural gas for October 2014–March 2015 will be close to 32-33 bcm. Out of this amount, Ukraine is planning to import 5.9 bcm from EU countries, use about 10 bcm of domestically produced gas and use up to 11 bcm of gas to be accumulated in its underground facilities by October. Such an outlook means about 27 bcm of gas will be available for Ukrainian consumers, implying a deficit of 5-6 bcm for the period. This deficit can be balanced by a 30% yoy decrease in gas consumption by industrial consumers and a 10% decrease in gas use by state organs and organizations, Prodan said.



Ukraine has accumulated 16.5 bcm of natural gas in its underground storage facilities as of Sept. 22, which is a 0.8 bcm increase month-to-date, according to the statistics of Gas Infrastructure Europe.



Alexander Paraschiy: We share Yatsenyuk’s pessimism regarding the outcome of the upcoming gas talks, which will make Prodan’s outlook for a drop in gas consumption quite relevant. Providing Ukraine will be able to import as much gas from the EU as the government has planned, we believe the nation indeed will be able to survive the upcoming six-month heating season in accordance with Prodan’s plan.



The core risk to this plan is a possible cut of gas supply from Russia to EU countries, which will not allow EU operators to re-export it to Ukraine (some attempts to cut supplies were reported two weeks ago). Note that the heating season in Ukraine starts in mid-October, during which the average monthly domestic gas consumption triples compared to the non-heating season.



Looking forward, the next heating season (2015/2016) will be much tougher for Ukraine without Russian gas import, as the gas deficit will increase by an extra 6 bcm. To solve this, Ukraine will have to either cut a deal with Russia or urge EU-based gas traders to start purchasing Russian gas on the Russian/Ukrainian border. Clearly, the latter option should be a core priority for Ukrainian energy policy over the upcoming months.

Источник: Конкорд Капитал