Ukrainian gas conversion proposal could hit storage withdrawals

Aura Sabadus

13-Nov-2020

LONDON (ICIS)–Gas companies active in Ukraine have urged parliament to change a detail introduced in a draft law for the conversion of volumes into energy units, amid concerns it would leave shippers unable to withdraw as much gas as initially injected.

A huge number of domestic and foreign companies have used Ukraine’s vast storage facilities to inject gas in 2020. Over 700 domestic companies have concluded storage contracts with the Ukrainian transmission system operator and around 80 non-resident countries from Europe, North America and China have been injecting volumes into local sites.

At the beginning of October, there was 245TWh stored in Ukraine, which meant that the country’s sites were just over 76% full.

Draft proposals submitted for a second reading in the Verkhovna Rada suggest the conversion of gas volumes from cubic metres into megawatt hours (MWh) should be made using a gross calorific value (GCV) of 10.35.

However, sources active in the market told ICIS that most companies which had injected gas in storage may have done so using different GCVs, in some cases as high as 10.60.

This means that if the law is passed using the 10.35 GCV which has been used in Ukraine’s old agreements with Russia’s Gazprom, many European companies could receive smaller quantities from storage than they initially injected.

“It is possible that this wasn’t done with evil intent, but if passed it could affect companies which have gas in storage,” said Vitaliy Radchenko, partner, at legal office Cameron McKenna.

“The GCV should be established as an average for all gas injected into storage, or as GCV of the gas they imported into Ukraine,” he said.

A source at the gas grid operator GTSO said transmission was not affected as gas was measured at entry and exit points.

The Ukrainian storage operator UTG did not comment by publication time.

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