Ukraine, Moldova boosting imports amid falling spot prices

Additional reporting by Luka Dimitrov

LONDON (ICIS)–Trading activity is ramping up in Ukraine and Moldova as prices are incentivising companies to ride out risks.

European gas traders are betting on a wide contango between spot and front-month prices to ramp up exports and inject gas in Ukraine.

With the day-ahead TTF gas price at a €76.40/MWh discount to the front month and most European storage facilities close to fullness, companies are taking advantage of Ukraine’s 30 billion cubic meters capacity to inject excess volumes.

Ukraine currently has around 15bcm/year of spare capacity for further injections.

Traders said the Polish-Ukrainian border was oversubscribed with a record 5.6mcm/day entering Poland on Friday, 1.6mcm/day higher than the technical physical capacity offered by the Polish grid operator Gaz-System earlier this year.

Meanwhile, close to 10mcm/day were imported physically from Slovakia via the Budince entry point and an additional 10mcm/day were netted out at the Velke Kapusany interconnection on the Slovak-Ukrainian border.

RIDING OUT RISKS

A gas analyst at a European utility said: “There is emerging new import demand coming out of Ukraine that is drawing gas from the west – where margins are super loose because of weak demand and [more] LNG.”

“We have very low spot prices in the LNG hubs and larger premiums out east, the TTF discount will probably recede when it finally gets cold but the Ukrainian demand further cements that eastern premium for the winter.”

A regional market trader added: “There is a big price spread between the spot and the front month and Ukraine has free storage capacity. There are many risks but at some profit level you can accept it.”

TRANS-BALKAN FLOWS

Meanwhile, neighbouring Moldova is also taking advantage of falling spot prices, which are around €80.00/MWh lower than the price it pays for Russian gas under its long-term contract.

State wholesaler Energocom has been buying volumes on the spot particularly after Russian supplier Gazprom reduced deliveries by 30% this month.

The country is now also working with partners in Romania and Bulgaria to access Caspian gas or LNG.

Gas supplies to Moldova could flow without interruptions in the coming winter months after its grid gas operator Moldovatransgaz announced measures to boost supply.

Moldovatransgaz said on 28 October it offers entry/exit capacity on the Trans-Balkan pipeline for auctions on RBP gas platform starting from 1 November. The exit capacity to Romania will be 36mcm/day, while the entry capacity into Moldova will be 12mcm/day.

The Trans-Balkan corridor, which has historically allowed the transit of Russian gas from Ukraine to the Balkans and Turkey via Moldova and Romania, is now also fully operational in reverse direction.

The total north-to-south capacity of the pipeline is over 20 billion cubic meters (bcm)/year.

The announcement by Moldovatransgaz comes a day after Moldova signed an agreement with Bulgartransgaz to access the grid. The agreements will allow:

– access and transmission of natural gas through Bulgartransgaz’s gas transmission networks;

– for the use of a virtual trading point

– for the purchase and sale of natural gas for balancing.

SECURITY OF SUPPLY

The agreement boosts Moldova’s security of supply and ability to diversify its sources, accessing LNG terminals in Greece and potentially other neighbouring countries as well as Caspian gas reaching Greece and Bulgaria.

Moldova has tasked state-owned wholesaler Energocom to buy natural gas and electricity on spot markets to boost the country’s security of supply.

The company also registered on the Romanian electricity and gas markets.

Greek sources told ICIS Moldova can bid for LNG capacity at the Greek Revithoussa terminal if they can prove they are credit-worthy.