RWE begins sending natural gas reverse flow to Ukraine from Poland

German utility RWE started flowing physical natural gas from Poland to Ukrainian incumbent Naftogaz, the company said on Tuesday.

The gas supplies fall under an existing five-year contract between Naftogaz and RWE Supply & Trading signed in May 2012, which covers deliveries of up to 10 billion cubic metres (bcm) of natural gas per year subject to individually agreed contracts.

An RWE spokesman added the price of the gas being sent to Ukraine is based on German hub prices. The company said in its statement the price also included the cost of transporting the gas to Ukraine. The utility had no comment to make on the volume being sent.

April expectation

Natural gas flows from the EU to Ukraine were expected to resume from early April when two separate discounts between Russia and Ukraine came to an end ( see ESGM 31 March 2014 ). The removal of the discount meant spot gas purchased at European gas hubs would be cheaper than Russian volumes supplied by producer Gazprom.

In the face of increased cost of Russian gas, Ukraine is increasingly looking to reverse flow from the EU. An agreement between Slovak grid operator Eustream and Ukrainian counterpart Ukrtransgaz is also expected to be reached on Tuesday over the physical reverse flow of natural gas between Slovakia and Ukraine ( see ESGM 14 April 2014 ).

Subject to the outcome of this agreement, RWE expects to begin providing gas to Ukraine through the Slovak border too.

“RWE believes that further significant volumes could be delivered to Ukraine if various transport restrictions at the Slovakian/Ukrainian border are politically and technically resolved within the next weeks or months,” the German utility said in a statement.

Russian supplier Gazprom increased the price it sells gas to Ukraine to $485 (€352.4) per thousand cubic metres (kcm) from April, after removing an exemption for its gas export duty it had given to Ukraine ( see ESGM 3 April 2014 ). This followed a separate price increase earlier that week, when Gazprom said it would raise the price of Russian gas to Ukraine in Q2 2014 to $385.50/kcm. The original Q1 price was $268.50/kcm. Miriam Siers and Johanna Blackader