Emfesz in negotiations with Gazprom to take over RUE supply
Hungarian Emfesz and Russian Gazprom have confirmed they are in negotiations for Gazprom to take over the supply of gas volumes that were to have been delivered to Hungary this year by RosUkrEnergo RUE, the controversial intermediary which for the last few years has been handling Russian exports of Turkmen-sourced gas to Ukraine. The volumes involved are 2.5-3 Gm3/yr. Gazprom on its part would not elaborate other than to say that the lack of physical gas supply to Emfesz was a problem that needed to be solved.
Emfesz will need increasing quantities of gas in Hungary when its 2400 MW combined cycle gas turbine power plant is built. Completion of the first 800 MW phase was scheduled for commissioning at end 2011-beginning 2012 but start-up is likely to be delayed by several months due both to the general financial crisis “delays in getting the permissions” according to Emfesz spokesman Boris Shestakov. A 4 Gm3/yr dedicated pipeline is being planned to link the power station to Ukrainian gas storage at Bogorodchany, just across the border from the Hungarian power plant. Shestakov emphasized that this pipeline connection would not link into the Hungarian gas grid.
Gazprom is in analogous talks with the Polish oil and gas company PGNiG regarding the replacement of 2.5 Gm3/yr gas formerly supplied by RUE. PGNiG said that the RUE contract was to have expired on 31st December 2009 but with an option for a two-year extension. At the moment PGNiG and Gazprom were looking at supplying RUE replacement gas just for this year and were agreed on most points. There were legal details however which still needed to be resolved, in part because RUE had not actually cancelled its contract with PGNiG. For the future PGNiG CEO Michal Szubski has said that Poland would prefer to sign a direct contract with Gazprom for the volumes hitherto supplied by RUE, rather than going through an intermediary. Asked whether the replacement volumes being offered by Gazprom for this year would be at a price discount to gas being supplied through Gazprom’s long-term contract with Poland, PGNiG spokeswoman Joanna Zakrzewska told ICIS Heren: “We hope to have the same terms as before”. Gas supplied by RUE to Poland was cheaper than gas supplied under the long-term Yamal contract. Though Poland has enough gas for now despite the non-delivery of the RUE volumes, it needs to ensure adequate supply to start filling underground storage from May onwards.
Gazprom confirms that the price for gas supply to Ukraine for the second quarter of this year will be $280/thousand m3, following the European price formula with a 20% discount. Ukraine has asked for a reduction in this year’s annual volume from the 40 Gm3 stipulated in the January contract to 33 Gm3. Gazprom has not sent an official answer to the request but is generally understood to have agreed to it. Gazprom’s lawsuit in the Stockholm arbitration court against Naftogaz for breach of contract and failure to transit gas at the beginning of the year has not been called off, though it seems to have sunk into the background, with both Ukraine and Russia appearing to be taking a more conciliatory attitude to the gas supply question.
In January RUE brought two lawsuits against NAK in the Stockholm court of arbitration which are still pending. RUE spokesman Andrei Knutov emphasised that these were entirely separate from Gazprom’s court action. The first was for the repayment of $600 gas debt owed by NAK for 2008 supply. The second was for breach of contract by NAK with respect to the lifting of gas from storage and transiting it to the border in accordance with last year’s transit and storage contracts.
The other main unresolved dispute is that of the ownership of 11 Gm2 gas in Ukrainian storage. NAK has said this gas was transferred from RUE to NAK in payment of the RUE gas debt to Gazprom valued at $1.7 billion. It seems that RUE regards the gas as not having been legally transferred and that it, RUE, still has legal ownership. However Gazprom still owns 50% of RUE and its relations with NAK will in some measure dictate to what extent RUE will instigate or persist with legal proceedings against NAK. The economic downturn and political uncertainty within Ukraine – including bad relations between the Ukrainian president Viktor Yushchenko and prime minister Yulia Timoshenko - are only increasing the unpredictability of events in Ukraine generally and the gas sector in particular. The date of the next Ukrainian presidential elections has been set for January 2010 and we are likely to see considerable political posturing from both sides up till then, which may well impact on the gas sector.
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