Ukraine’s GTSO lines up 2020 plans for domestic market, regional trading

KYIV (ICIS)–Ukrainian transmission system operator (TSO) GTSO is working to establish virtual interconnection points with Poland and Hungary and launch backhaul services with Slovakia within the next four months.

Speaking at a shippers’ meeting held at the Adam Smith Ukrainian Energy Forum in Kyiv on Wednesday, Sergiy Makogon, CEO of GTSO said the new border services were just some of several projects this year aimed at developing the local gas market and regional cross-border trading.

GTSO also intends to offer daily, monthly, quarterly and yearly capacity on its border with European neighbours in line with the ENTSOG calendar from this year, carry out tests for short-haul transit and switch from Russian-style cubic meter measurements to EU-compliant energy units on the Ukrainian market.

He said there were also plans to change the mechanism for calculating the domestic daily balancing price in a way that would improve the service and discourage companies from triggering positive or negative imbalances.

VIRTUAL INTERCONNECTION POINTS

As a priority, GTSO will be looking to establish virtual interconnection points (VIPs) with Hungary and Poland.

Only last month, Makogon told ICIS that GTSO would be looking to cluster up the Budince-Velke Kapusany interconnection points on the Slovak border, Beregovo 1400 and Beregdaroc 800 on the Hungarian border and Drozdovichi-Hermanowice on the Polish border.

Ukraine had been forced to operate double interconnection points because Beregovo 1400, Drozdoviche and Velke Kapusany had been blocked by Russia’s Gazprom for transit to Europe under the terms of a ten-year contract which ended on 1 January 2020. This meant that Ukraine could not use these points for reverse flows and had to establish separate interconnections for imports.

With the expiry of the previous transit contract, GTSO is firmly in charge of its western interconnection points and has already started virtual reverse flows with Poland in January.

GTSO now plans to establish a VIP with Hungary on 1 April and launch a consultation for a similar merger on the Polish border from the end of this month, with a view to set up a VIP by 1 June 2020.

VIPs would help to deepen regional market integration.

Andrii Prokofiev, head of business development at GTSO told the shippers’ forum that GTSO was in talks with its Slovak counterpart, Eustream to start backhaul at the Velke Kapusany interconnection point. He said the Eustream tentative date was 1 March.

Prokofiev said GTSO was also in talks with Romanian TSO Transgaz with regards to a possible interconnection agreement for the Tekovo-Mediesu Aurit interconnection point.

The two countries signed an agreement for the transit of gas via the Trans-Balkan pipeline which has historically linked Ukraine to the Balkans. However, this agreement only covers one of four interconnection points at the Orlovka-Isaccea border. This border point is some 700km away from the Tekovo-Mediesu Aurit border which links Ukraine directly to Romania.

Romania’s Transgaz has so far refused to sign interconnection agreements for other points, but Prokofiev said the two TSOs would be holding technical talks in the upcoming weeks regarding gas metering at Tekovo and Mediesu Aurit. This may be a preliminary step towards signing an interconnection agreement for this point.

SHORT-HAUL TRANSIT

The Tekovo-Mediesu Aurit is one of several border points for which GTSO is keen to offer short-haul.

The service was introduced at the beginning of this year and the TSO is now keen to start mock runs to test companies’ interest in using the transmission system either to transit gas from one country to another or bring gas into Ukraine, store it under the existing customs warehouse regime and take it out when needed.

Short-haul services are offered at reduced tariffs and would allow companies in Hungary, Poland, Romania and Slovakia to transport gas using the Ukrainian transmission system.

Traders active in the market welcomed the service, although they pointed out that it may be more expensive than in western European markets.

Under the terms of the new interconnection agreements signed with these countries volumes are now measured in energy units in line with EU practices.

Ukraine is also working to switch from cubic metres to energy units for the domestic market and storages from this year.

GTSO also expects to start offering capacities with its European neighbours in line with the ENTSOG calendar from this year.

Capacity with Hungary, Slovakia and possibly Romania will be auctioned on Hungary’s RBP platform, while that with Poland on the Polish GSA.

The first annual capacity auction will be held on 6 July, the first quarterly capacity auction on 3 August and the monthly capacity tender on 21 September.

GTSO is also in talks with the Moldovan incumbent Moldovagaz to organise capacity auctions on a yet-to-be-agreed platform and establish reverse south to north flows. Moldovagaz is in the process of unbundling and a new transmission system operator is expected to be established and certified by the end of the year.

BALANCING MARKET

GTSO is also working to improve services for the domestic market, and in particular with regards to the balancing market.

The platform has proved controversial since its launch in March 2019 because of hefty imbalances linked to last year’s transmission tariffs which were not sufficient to allow the transmission operator to recoup costs as well as the unauthorised off-take of gas by distribution companies.

Tariffs have now changed and brought in line with GTSO’s expectations, but the unauthorised off-take of gas persists.

Furthermore, earlier in February, GTSO decided to retroactively decrease the daily balancing price to 1 January, which meant that companies which found themselves in positive imbalance in January could not receive the amount of money they expected.

The sudden change triggered fury among market participants, but GTSO argued the change was necessary in order to align the balancing price to the spot market as well as to discourage companies from being in positive imbalance.

Makogon said on Wednesday that GTSO would be looking to calculate the marginal price in line with the TSO’s costs and that the change was likely to kick in from March.

However, he declined to explain what methodology would be applied for the February price.