Moldova to introduce state of emergency as Gazprom notifies incumbent of gas supply cuts

LONDON (ICIS)–The Moldovan government is expecting to introduce a state of emergency from Thursday after Gazprom notified the incumbent Moldovagaz it would cut supplies from 20 January because of an unpaid bill.

Prime Minister Natalia Gavrilita said in a press briefing on Wednesday there would be a government meeting later in the afternoon followed by a session in parliament on Thursday when members would be asked to introduce the state of emergency.

A commission for emergency situations would then decide on measures to guarantee backup supplies.

Vadim Ceban, president of the board of directors at Moldovagaz confirmed to ICIS Gazprom had notified the company of the supply cuts and said the government was working to find solutions.

Moldovagaz is expected to pay its bill for current supplies by 20 January. However, a record spike in prices in December meant that its import price, which is 70% linked to the Dutch TTF front month and 30% to oil, had risen to an estimated $647.00/1000m3 (€54.29/MWh).

To compare, the December import price stood at $450.00/1000m3.

Speaking to ICIS, Sergiu Tofilat, a Moldova-based gas expert said the government would find the cash to pay the January bill but said February would be more difficult to cover.

He said Moldovagaz was expected to make an advance payment that would cover 50% of the total sum for January. This means Moldovagaz would have to pay around $64million (€56m) by 20 January. The state company already has $38m but it still needs $25m to pay the bill by the due date.

The remaining 50% of the January bill is due to be paid next month together with 50% of the February bill.

Tofilat said Gazprom had always had a requirement for advance payment in its export contract with Moldovagaz, which it partly owns.

However, he said, it never asked for advance payment until November 2021, insisting they were now pushing Moldova’s pro-EU government to pay before the end of the month.

A possible solution may be for the government to reschedule Moldovagaz’ payment of value added tax so that they would be allowed to pay it by the end of the month.

Tofilat said the February bill may amount to $547.00/1000m3.

Other options the government may be looking into would be to ask the Cuciurgani thermal power plant in Transnistria to switch to fuel oil, which would lead to a 30% drop in gas demand.

He said it was also necessary for the government to hike end consumer tariffs, which are now significantly lower than the gas import bill.

The tariff is now around $430.00/1000m but, he said, there was a need to raise both gas and electricity tariffs.

He said the gas-fired generation was taking up 30% of gas demand during winter and added there was a need for electricity tariffs to increase by approximately 20% on current levels.

Moldova signed a five-year import contract with Gazprom at the end of October 2021 to import 3bcm/year of gas. About 1.2bcm/year is for Moldovan consumption, while the remaining 1.8bcm/year is for Transnistria, an unrecognised breakaway republic, with close economic and political links to Russia.