Ukraine, Slovakia agree on gas virtual reverse flow rise during Budince outage

BUCHAREST (ICIS)–Slovak grid operator Eustream will offer 60 million cubic metres (mcm)/day of capacity allocated on the Ukrainian Budince border point to the Velke Kapusany point between 1 July-1 October, the company said on 29 June.

Flows at Budince to Ukraine will stop from 11 August until 1 October 2020 for urgent repairs, the Ukrainian transmission system operator (TSO) GTSO said on 23 June.

The two TSOs are now substituting this capacity for virtual reverse flow access at Velke Kapusany.

Traditionally, Ukraine has been exporting Russian transit gas to Slovakia via the 200mcm/day Velke Kapusany border point and imported physical volumes via the 42mcm/day Budince interconnector.

European exports to Ukraine gained particular importance this year as one of the few routes available to European companies for managing oversupply in the current low-price environment and exceptionally full European storage sites.

Over 50 European companies are estimated being ready to export some 3 billion cubic metres (bcm) of gas for injection into Ukrainian gas storages or export to the domestic market.

The capacity offered by Eustream will be fully interruptible and dependent on Russian flows from Ukraine into Slovakia.

Eustream did not say whether shippers’ capacity from Budince will be transferred to Velke Kapusany free of charge or whether they would have to purchase the backhaul capacity.

GTSO CEO Sergiy Makogon said the Ukrainian company appreciates Eustream’s decision to offer additional capacities at Velke Kapushany. “This offer means that all shippers interested in storing gas in Ukraine will be able to ship gas to Ukraine during the maintenance period. Unfortunately, the process of offering and allocating capacities currently is not very transparent and the market cannot understand why only 60mcm/day is being offered and why only until 1 October,” Makogon said.

Ukrainian energy regulator NERC approved the free transfer of import capacity from Budince to Velke during the outage on 26 June.

However, the decision is valid only if the Slovak regulator officially rejected GTSO’s other proposal – to merge the two points into a virtual interconnection point (VIP), Makogon added.

Virtual reverse flow

GTSO and Eustream signed an interconnection agreement on 1 March which effectively allows for virtual reverse flows from Slovakia into Ukraine.

Since GTSO and eustream signed the agreement, the Slovak TSO has made available 10mcm/day at Velke Kapusany for backhaul.

GTSO said in a statement on that Eustream could offer as much as 109mcm/day of backhaul capacity during the maintenance period.

This would be a virtual reverse flow, equal to the amount of gas that Slovakia imports from Ukraine via the Velke Kapusany interconnector.

The solution offered by GTSO would allow companies which had booked capacity at Budince to have it transferred free of charge to Velke Kapusany for the duration of the outage.

GTSO had also suggested that Eustream merge the two interconnectors into a virtual interconnection point. The merger would facilitate the same service, protecting companies looking to export gas into Ukraine from interruption.

The Ukrainian TSO is keen to persuade Slovakia to apply EU network codes at its interconnection points which would mean that Eustream would have to maximise border capacities and offer them on auction platforms rather than on an ad-hoc first-come-first-served basis as is currently the case.

Unplanned outage

GTSO announced the Budince outage last week, offering two solutions to allow companies to export gas into Ukraine without interruptions during the peak storage season.

These include the merger of the two border points or a temporary capacity transfer at no cost for affected companies.

Eustream told ICIS on 29 June that GTSO proposals for contract switching was not recognised by Slovak regulation.

“The theoretical question of creating a VIP between Velke Kapusany and Budince would require significant legislative changes in Slovakia. Such changes fall within the scope of the independent regulator, not Eustream, and possibly cannot be done in the given timeframe. But first of all we find this topic completely unrelated to the current maintenance question,” Eustream said.

“What we believe is that now the focus should be given to workable solutions: i.e. maintenance carried out in more suitable time; with the modern inspection methods and using other technical options,” the company added.

GTSO said the same day the Budince interconnector had to undergo maintenance, but pointed out that it was dealing with some of the worst floods and landslides in decades in western Ukraine – not far from the Budince interconnector.

This means staff would first have to deal with the damage caused by floods before starting work at Budince.

Makogon explained that although all interconnection points were in areas affected by the floods, GTSO had enough flexibility to redirect the flow of transit gas on backup lines. The only exception was Budince.

“The situation is difficult but under control,” Makogon said.

“We will have a lot of repairs to do this year and we will start as soon as the weather allows. No interruption is planned since all routes except Budince have backup pipelines and we can redirect flows.

“For example, there are two pipelines to Poland and two to Hungary but since we have virtual interconnection points there, we can easily redirect flows without disturbance to shippers. Velke Kapusany has four pipelines of 1,400mm. Budince is actually a bypass, a single 700mm pipeline, which was quickly built by Eustream in 2013 to organise a physical reverse flow to Ukraine from the EU.”