Ukraine, Romania should join efforts to cover mutual gas needs, TSO

• Ukraine and Romania could help each other to cover gas demand

• Capacity swaps possible to supply key regions

• Ukraine offers cheap storage to Romania

LONDON (ICIS)–Ukraine and Romania should work in tandem to guarantee access to cross-border flows and storage capacity as supply patterns are changing regionally, the general manager of the newly established Ukrainian gas grid operator said on Monday.

Sergiy Makogon, general manager of Gas TSO of Ukraine, said the two countries had complementary needs and urged the Romanian counterpart, Transgaz, and regulator ANRE to cooperate on several projects.

“Ukraine depends on Romania to import gas into Ukraine, Romania needs gas flows from Ukraine to ensure security of supply in northern Romania,” he said.

Makogon pointed out that Romania and Ukraine share two border points for gas flows.

The Isaccea-Orlovka interconnection point (IP) links southern Romania to the eastern Odessa region of Ukraine. This has been one of the main border points for the transit of Russian gas along the Trans-Balkan pipeline to south-east Europe and Turkey.

The other point – Tekovo-Mediesul Aurit – is located some 700km away from Isaccea and bridges north-western Romania with south-western Ukraine.

So far, the former had been used for the transit of Russian gas to the region, while capacity on the latter had been typically booked in winter by Romanian companies looking to cover peak demand.

However, as Ukraine’s own transit contract with Russia expires on 31 December 2019, the country has been keen to sign interconnection agreements with neighbouring countries including Romania.

SWAPS

Makogon said Ukraine could import gas in reverse flows from Romania via T1, one of the three Trans-Balkan lines which cross Romania.

In exchange, Ukraine could supply the same amount of natural gas at the Tekovo-Mediesul Aurit IP for off-takes by Romanian companies.

The technical capacity at this point is 12 million cubic metres (mcm)/day, but Makogon said firm capacity at both border points would be 4.1mcm/day.

Ukraine is keen to conclude such a swap with Romania because it may encounter difficulties supplying natural gas from its own system to the Odessa region.

This is because in order to reach this part of the country, the transmission pipeline has to cross the Republic of Moldova as well as the breakaway Transnistria region.

The supply of gas to Moldova and Transnistria is controlled by Russia’s Gazprom, which may frown on Ukraine taking an active role.

On the other hand, Romania has been relying heavily on imported gas after the government passed a regulation that led to severe market distortions, increasing its dependence on gas bought from Hungary and pushing up its premium over other European hubs to an estimated €10.00/MWh.

As winter approaches, Romania will have to increase its import capacity with neighbouring countries including Ukraine to respond to any potential spikes in consumption.

For that reason, Ukraine needs Romania just as much as Romania will need Ukraine to cover each other’s gas demand.

160 TIMES CHEAPER

Makogon further explained that Romanian companies could take advantage of Ukraine’s storages, rather than invest billions of euros in building their own facilities.

He questioned plans by the Romanian regulator ANRE to double the country’s storage capacity to six billion cubic metres in the next three years. The cost of the expansion would be just above €3bn.

“It is worth noting that there is currently storage capacity of 10bcm in Ukraine,” he said.

“We are ready to provide this capacity to Romanian companies at less than €1.00/MWh per storage cycle. To store 3bcm of gas in Ukraine’s storages will cost about €21m, which is 160 times cheaper than the €3.36bn Romania plans to spend on expanding its storage capacity,” Makogon added.