Ukraine’s natural gas TSO Ukrtrasngaz mulling GSE transparency platform

The European Commission has invited Ukraine’s natural gas transmission system and storage operator Ukrtransgaz to join the transparency platform run by Gas Storage Europe (GSE), ICIS has learned.

The move is intended to encourage the development of a traded gas hub in Ukraine and use of its storage facilities by European companies.

“I am confident that the participation of Ukrtransgaz – as the storage operator in Ukraine – in [the GSE] transparency exercise would [be] beneficial, and during the gas coordination group both GSE and Ukrtransgaz appeared to be open to work together on this issue,” Klaus-Dieter Borchardt, director of the Commission’s internal energy market directorate, said in a letter to the two organisations dated 15 November.

Borchardt asked GSE to describe the aggregated gas storage inventory (AGSI) transparency tool to Ukrtransgaz and explain the methodology and frequency of the storage data that companies provide.

He also asked GSE to give Uktransgaz an exact list of data that it would have to provide to become a part of the platform.

Borchardt said Ukrtransgas should treat this discussion as a high priority.

Ukraine’s storage

Ukrainian energy minister Eduard Stavitsky in September met the European Commissioner for energy, Gunther Oettinger, to discuss cooperation between Ukraine and the EU to create a gas hub in Ukraine ( see ESGM 5 September 2013 ).

“Ukraine can already now offer traders access to about 15 billion cubic metres (bcm) of storage capacity at rates much lower than in Europe,” Stavitsky said.

Ukraine has 12 storage facilities controlled by state-owned incumbent Naftogaz, which owns Ukrtransgaz.

The total working capacity of the storage is 31bcm. There is also a 1.5bcm storage facility owned by Ukrainian production company Chernomorneftegaz.

Injection and withdrawal rates vary between facilities. Analyst Dmitry Marunich of the Kiev-based Institute of Energy Studies estimated last year the average daily injection or withdrawal rate over all facilities at 100-150million cubic metres (mcm).

Sceptical

Industry experts remain sceptical about the prospect of European companies making use of Ukrainian storage.

Yury Korolchuk, an analyst with the Institute of Energy Studies, recently told ICIS that only reversed gas flow from Slovakia would give European companies a real opportunity to inject large amounts of gas into Ukrainian storage.

Ukraine and Slovak TSO Eustream now seem to have made some progress to that end with the possibility of physical reverse flow via a now-defunct Soviet-era pipeline ( see ESGM 19 November 2013 ).

In addition, although Ukraine has in place regulation for accessing gas network and storage facilities, this does not work in reality, according to Korolchuk.

“There is a high risk of a new Russia-Ukraine crisis during the winter. In that case Ukraine could use gas belonging to European companies for guaranteed supplies of Russian gas to the EU,” he said.

Obstacles

Access to Ukraine’s storage sites for European companies is blocked by several issues.

One problem is that gas injections and withdrawals follow strictly seasonal patterns, with no possibility to move gas into store after the official end of the summer injection season, which runs 15 April-15 October, and no possibility of withdrawal after the winter season ends.

A source from a Ukrainian gas producer, who wished to remain unnamed, previously told ICIS this was not a concern, because Naftogaz was usually ready to facilitate gas balancing, and it was generally possible to find counterparties willing to arrange surface swaps.

In addition, European buyers of Russian gas currently buy the gas at Ukraine’s border with Europe. To keep the gas in Ukrainian storage, European suppliers would need to buy their Russian gas on the Ukraine-Russia border. They would then need to sign individual transit agreements with Ukraine to transport the gas across Ukrainian territory into storage and onwards to Europe. European companies would be wary of this, having observed problems created by contractual disagreements between Gazprom and Naftogaz in recent years, according to Marunich. Katya Zapletnyuk