Naftogaz of Ukraine: Pumping plan impossible without Russian gas

Naftogaz of Ukraine, the state-owned monopolist, insists that the government-set plan of accumulating 17 billion cubic meters of gas in the underground gasholders is excess. Andrey Kobolev, Naftogaz CEO, told gazeta.zn.ua, it will be enough for the country if there are 15.1 billion cubic meters of gas in the gasholders at the beginning of the heating season.

“There are three important figures: the gas volume for October 15 (initial plan – 14.5 billion cubic meters, now we have corrected it to 15.1 billion, taking into account the current import), for January 1 (13.1 billion) and for the season end (8 billion). The minimum is 6 billion cubic meters of gas in the underground,” Kobolev told journalists.

At the same time, he admitted that it is impossible to implement the government-set plan without procuring gas from Russia: “To buy such volumes of gas by the beginning of the heating season, we would have now to appeal to the Russians, as our import capacities are limited. There is no alternative…”

Experts say the reason why Naftogaz insists on less volumes of gas is that they need to buy the Russian gas. By data of Ukrtransgaz, on September 17, there were 13.5billion cubic meters of gas in the underground gasholders and the daily pumping of the own and reverse gas is 65 million cubic meters. By mid-October, it will be possible to pump some 1.8 billion cubic meters of gas. The figure mentioned by Kobolev will be ensured. Without the Russian gas, Naftogaz of Ukraine will not manage to accumulate more reserves.

Will that volume be sufficient for the heating season in Ukraine? Only if the winter is warm like the previous one, experts say. Otherwise, Kiev will have to take the transit gas or reduce gas supply inside the country. Why do Brussels and Moscow insist that the reserves in Ukraine’s gasholders must total at least 17 billion cubic meters?

The Russian gas for Ukraine is still less expensive than the reverse gas supplies from the EU. Kiev knows this, but still demands Gazprom to sign an additional agreement that changes the contract fundamentally, for instance, removes the “take and pay” standard and the commitments to pay for the gas supplies to Donbass. At the same time, Kiev lacks money to buy gas from any supplier. After receiving a tranche from the IMF, Naftogaz of Ukraine hopes to get a $500-million credit from the World Bank for procurement of gas for stable winter season, though this credit agreement is endangered now. After the Ministry for Economic Development regained control over Ukrtransgaz, Naftogaz of Ukraine said the credit liabilities and the capacities of the company have been endangered too. These concerns were partly confirmed by the European Bank for Reconstruction and Development (EBRD) that lent $300 million to Naftogaz of Ukraine for procurement of the reverse gas this summer. Francis Malige, Managing Director for Eastern Europe and the Caucasus at the EBRD, demanded that the decision is cancelled and all the steps are negotiated. Experts say the decision to transfer the company to the Ministry was nothing but redistribution of control over financial flows, which will be supervised by the president’s team in Uktransgaz from now on.