EU shippers avoid Ukrainian gas storage as no exit tariffs set

European shippers have showed little interest in booking storage capacity in Ukraine after the Budince border point became bidirectional earlier this year, because Ukraine has not set an exit tariff.

Flows from Ukraine to Slovakia via Budince became possible in April after the Ukrainian parliament adopted a relevant law and an interconnector agreement between Slovak grid operator Eustream and Ukrainian network operator Ukrtransgaz was amended.

It was expected the scheme would attract more European suppliers into Ukraine hoping to store gas in the country over summer, and later sell to domestic customers. The scheme was designed as reassurance for foreign companies that they could move gas back to Europe in case they were unable to sell the gas they kept in Ukrainian storage.

“The service that would allow [shippers] to store gas temporary in Ukraine and transport it later to other countries has not been very popular yet,” said Sergiy Makogon, executive director of Ukrtransgaz which operates Ukrainian storages.

“The main problem preventing shippers from active use of Ukrainian storage is low prices on [gas storage capacity] in the EU. Because of high entry tariffs in Ukraine … using storage in Ukraine is not economically attractive for European traders.”

A Slovak source close to the matter confirmed that there had been no interest in gas flows from Ukraine to Slovakia since they were enabled. “Probably the EU has enough of its own storage,“ he said.

However, according to Makogon, some traders have shown interest in booking storage capacity in Ukraine but as Ukrainian energy regulator NERC has not yet set exit tariffs, no serious talks have been held.

Ukraine set an entry charge of $12.47/thousand cubic meters (kcm) from 1 January for cross-border flows.

“They introduced the entry for cross-border flows, but did not set up the exit,” a NERC representative told ICIS earlier this year, adding that without relevant legislation it was impossible for the regulator to introduce a tariff for entry and exit points from the pipeline system located on the territory of Ukraine.

The Ukrainian government also failed to approve a law that would set up a new independent energy regulator last week. Adoption of the law has been delayed several times.

Ukrtransgaz is considering introducing a reduced tariff for transporting gas from the Ukrainian border to storage sites if the gas is later exported from Ukraine, Makogon said. But as most interest in booking storage capacity in Ukraine is likely to come from shippers willing to sell gas in the country rather than export it later, the introduction of a reduced tariff may not attract new shippers to the Ukrainian market. ekaterina.kravtsova@icis.com