Ukraine seeks to increase foreign interest in gas storage

Ukrainian-registered affiliates of foreign gas suppliers currently have the right to store gas on Ukrainian territory, but cannot export it as gas export is forbidden under Ukrainian legislation, the Ukrainian Association of gas traders told ICIS on Wednesday.

Foreign companies storing gas in Ukraine could only sell the gas inside the country. “Under these conditions who would be interested in storing gas in Ukraine?” the Association added, though it also said Ukrainian gas prices were competitive.

In an effort to make Ukrainian storage more attractive for non-domestic companies Ukrainian energy regulator NERC plans to remove the entry/exit tariff multipliers for access to the country’s storage facilities from April, NERC told ICIS on Tuesday.

A multiplying factor of 0-0.5 is currently applied to the gas transport charge to and from storage sites, and this will probably be removed from April in order to make storage in Ukraine more attractive for non-domestic companies, the regulator said.

Despite the approval and official publication last year of a new gas storage code, new storage tariffs have not yet been implemented in Ukraine, NERC confirmed.

Compliance with EU rules

A new storage network code based on European Third Energy package principles was published in December 2015 and should have come into force from that date.

But tariffs have not yet been calculated under the new system and storage charges are still being made according to the old system.

Under the old system, storage charges were regulated by NERC and the latest are set at a total charge of Ukrainian hryvnia112/kcm (€3.7/kcm ex-VAT and other levies) This figure comprises Hryvnia 32.90/kcm for injection, Hryvnia 46.20/kcm for storage over one storage season (15 April -15 April following year), and Hryvnia 32.90/kcm for withdrawal.

A draft decision on the methodology for calculating storage tariffs will be published in the near future, according to NERC, based on payment for capacity rather than volume stored.

Normally the procedure for legislative approval of methodologies proposed by the regulatory commission lasts at least three months.

In the event that legislation giving the regulator greater independence and authority is approved in time, this procedural period could be reduced to one month.

Unlike the situation with storage, entry/exit-based transport tariffs under the new gas law have been in force since the beginning of the year. (see ESGM 31 December 2015).

Ukraine has some 32 billion cubic metres gas storage capacity near its western border with Europe and has the potential to become an important resource for European traders.

But until the country allows gas exports that will remain dormant and limit the liberalisation of the Ukrainian gas market. elizabeth.stonor@icis.com