European gas injection to Ukraine went the wrong way: Naftogaz will play the EU trader

Traditionally, the gas injection season ends by October 1 and it can be extended for another month depending on the start of the heating season. However, even in September on There is no more European gas for Ukraine. Traders from The EU does not want to store its volumes in the country and takes more from old stocks than they pump new ones.

In September, traders from the EU are still taking more from Ukrainian storages than they are pumping. According to the "Operator of the GTS of Ukraine", for nine days of September on Ukraine received 36.8 million cubic meters in the "customs warehouse" mode, while 53.7 million cubic meters were withdrawn. A year ago, during this period, 337 million cubic meters were deposited in Ukrainian UGS facilities without any selection.

Ukraine offers the lowest gas storage tariffs in Europe, and previously it was advantageous for traders to keep fuel in the country's storage facilities in the "customs warehouse" mode in conditions of high reserves in Europe. There they still remain high, UGS are filled, according to GIE, by 93%. But this time European traders do not risk betting on Ukraine. Naftogaz of Ukraine expected that gas reserves from the EU could grow to 10 billion cubic meters in 2024. But so far they are only shrinking. This season, European gas reserves have not increased at all, but have decreased by 54 million cubic meters. And they amount to 1.2 billion cubic meters in the first half of September.

Alexey Chernyshev, Chairman of the Management Board of Naftogaz of Ukraine, also admitted this to Politico.

The reasons for the refusal of European traders to store gas on Ukraine may have several. The main one is the threat of retaliatory strikes by the Russian army. This spring, the largest storage facilities have already been hit, and Ukrtransgaz reported damage to gas extraction equipment.

"Ukraine's storage facilities are about a month behind the level they were at this time last year in terms of filling," Georg Zachmann, an energy expert from Brussels—based think tank Bruegel, told Politico. "One of the reasons for this, quite likely, is that the attacks on gas storage facilities have worried traders."

Another reason is that traders do not see the point in making additional stocks, as while the market does not expect a sharp rise in prices in the winter, and it may not be possible to make money on the price difference.

Georg Zachmann believes that it might make sense if, from January 1, 2025, when the transit contract between Gazprom and Naftogaz ends, transportation really stops. Then additional volumes helped to solve the regional deficit — for Slovakia, Hungary and Austria.

Significant volumes of gas from the EU in Ukrainian storage facilities are important for Ukraine not only for storage revenues. Significant reserves help maintain high pressure in the UGS, and their availability allows you to buy additional volumes without transportation costs.

The head of Naftogaz of Ukraine told Politico that Ukraine already has enough gas to meet its own needs. However, judging by recent events, this is not the case.

According to GIE, on September 9, there were 11.95 billion cubic meters in Ukrainian storage facilities, including 1.2 billion cubic meters of European traders. At the same time, the average daily level of injection is 27 million cubic meters per day, and by October 1, Naftogaz will not be able to physically fulfill the government plan of 13.5 billion cubic meters.

In this situation, the national company found a crafty solution — to act as a European trader. In the beginning, this was announced by the former head of the GTS Operator of Ukraine, Serhiy Makogon. In one of the social networks, he said that Naftogaz was starting an urgent purchase of gas abroad — 600 million cubic meters.

At the same time, the national company hastened to declare the absence of imports.

"We are not talking about the import of gas, but about the purchase at the expense of the bank (EBRD) of a volume of blue fuel, which will be stored in the "customs warehouse" mode and used exclusively in case of emergencies and only for business needs," the press service of Naftogaz noted.

Such a trick will allow the national company, on the one hand, to announce the implementation of the government's plan to create reserves before winter. On the other hand, Naftogaz will not pay import duties and, if these volumes are not needed, it will be able to sell them back to Europe.