Ukraine urges EU to establish joint strategic gas reserve

LONDON (ICIS)–The Ukrainian gas transmission system operator has urged the EU to consider using the country’s vast storage capacity to establish a pan-European strategic natural gas reserve in response to possible supply disruption. In a note posted on Facebook at the end of last week, Sergiy Makogon, CEO of GTSO, said Ukraine’s gas storage facilities which have a total capacity of 31 billion cubic metres could become a central part of Europe’s energy security.

GTSO and Ukrainian government sources say the EU or European companies could be given a stake in the transmission and storage system operators of Ukraine.

They also agree that such a project would require Ukraine to retain the existing Russian transit as well as expand its border capacity with neighbouring EU countries.

Currently, companies which were buying gas from Russia and were interested in storing it in Ukraine could simply net it out at the border thanks to virtual reverse flows.

However, that option is now shrinking because Gazprom has already diverted gas which had been transited to Hungary via Ukraine to a new Balkan route.

It is also pushing to complete its 55 billion cubic metre (bcm)/year Nord Stream 2 pipeline across the Baltic Sea and it may divert the existing 40bcm/year Ukrainian transit to this new corridor.

If that happens, Ukraine may lose its virtual reverse flows to Poland and would retain a physical interconnection with Slovakia.

In the absence of reverse flows, Ukraine’s firm capacity which would allow physical imports stands at 27 million cubic metres/day.

This means, that it may physically import only 9.8bcm/year, which is less than a third of Ukraine’s total storage capacity of 31bcm.

Last week, the European Commission said it would review issues around storage and security of supply in response to an ongoing energy crisis, which has seen gas prices soaring 600% this year.

One of the proposals relates to setting up new cross-border regional gas risk groups that would focus on regions with low storage.

GTSO and Ukrainian government officials hope the proposals would be followed up in discussions between the Ukrainian president Volodymyr Zelenskyy and EU leaders at a summit scheduled for 12 October.