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MOU near on physical gas reverse flow from Slovakia to Ukraine

19 Nov 2013 17:01:39 | esgm

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Slovak transmission system operator (TSO) Eustream and Ukrainian equivalent Ukrtransgas are in intensive negotiations on the text of a memorandum of understanding (MOU) which would allow reverse gas flows from Slovakia into Ukraine, both sides confirmed to ICIS on Tuesday.

Ukrtransgas said the negotiations involved the setting up of a new physical pipeline connection between Ukraine and Slovakia and that all necessary infrastructure was in place on the Ukrainian side to receive reverse flow gas.

Eustream would only say that negotiations were very advanced but not yet finalised and would not comment further.

ICIS understands from informed sources that the intention is to utilise a now-defunct Soviet-era pipeline to take the gas.

This will require the construction of some extra infrastructure at an estimated cost of €15m, which Eustream will probably cover.

What is important is that on the Slovak side the refurbished pipeline connection will not interfere with the current east-west flow of Russian gas from Ukraine into Slovakia.

There will be no virtual reverse flow of Russian gas from Slovakia to Ukraine at Velke Kapusany, the main entry point for Russian gas leaving Ukraine to go into Europe.

The capacity of the new reverse flow pipeline is like to start at around 8 million cubic metres (mcm)/day with the potential for expansion to 20mcm/day.

A new physical connection is the quickest solution especially as Russian Gazprom has declared itself in the past as wholly against virtual reverse flow from Slovakia to Ukraine.

Velke Kapusany on the Slovak-Ukrainian border is the delivery point for numerous Gazprom contracts with many European shippers. Ukraine transited 81 billion cubic metres (bcm) of Russian gas to Europe in 2012. It is the location for numerous title transfer operations, all requiring the involvement of at least three parties - Eustream, Gazprom as the supplier and the European shipper ( see ESGM 7 October 2013) .

The Ukrainian transit system for Russian gas and the border point at Velke Kapusany are very much under the eye of Gazprom, having been set up decades ago under the Soviet Union.

Even if Ukraine wants to engage in virtual reverse flow at Velke Kapusany, it will need to do so with the agreement of Gazprom, and that does not look likely.

ICIS also understands that Ukrtransgas is not provided with information from Gazprom as to what gas volumes are going to individual European buyers of Russian gas, which would cause problems with the matching of nominations for virtual reverse flow.

Ukraine has since 2012 taken modest volumes of gas in reverse flow from Hungary and Poland using small pipelines at Beregdaroc and Drozdowicze located away from the main transit lines, so there is a precedent for this approach.

As to the timing for completion of a physical reverse-flow line from Slovakia, ICIS understands that the EU, Eustream and Ukraine are pulling out all the stops to get the Slovak-Ukrainian MOU ready for the Third Eastern Partnership summit to be held in Lithuania on 26-28 November, where it is hoped Ukraine will sign an EU accession agreement.

ICIS understands the physical infrastructure required could be in place in a matter of months.

The question that remains is who would want to take gas from Slovakia to Ukraine given that an open season conducted by Eustream last year raised no interest at all.

But given it would not require Gazprom’s approval, German–based RWE may want to do so, as it is already conducting reverse flow from Hungary and Poland into Ukraine. Elizabeth Stonor

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