Monday, April 28, 2014

Ukraine, Slovakia Sign Memorandum on Reverse Gas Deliveries

Ukraine and Slovakia have signed a memorandum allowing for the start of reverse gas deliveries from Europe through Slovakia, acting Ukrainian Prime Minister Arseny Yatsenyuk told reporters Monday.
“Ukraine has just signed with Slovakia, namely with Slovak Transit Company Eustream, a memorandum on the cooperation in the energy field , which stipulates the start of reverse natural gas supplies through the territory of Slovakia,” Yatsenyuk said.
“According to this memorandum, if all parties meet the terms of the [mentioned] memorandum, we will be able to receive 8 billion cubic meters of gas per year,” he added.

Following Russia’s decision to cancel all discounts for Ukraine’s Naftogaz in early April, the company started importing gas from Europe through Poland. The total amount of reverse gas delivered to Ukraine via this route is currently estimated at a modest 1.5 billion cubic meters per year.
The new agreement with Slovakia, according to Naftogaz estimates, will guarantee up to 30 billion cubic meters of gas annually.
European Commission spokeswoman Sabine Berger said earlier that in accordance with the memorandum, Ukraine could import as much as 8 billion cubic meters of gas through the Slovak pipeline starting this fall.
Under a number of agreements between Russia and Ukraine, Kiev received unprecedented privileges and discounts on the price of Russian natural gas. In December, Moscow gave Ukraine a 30 percent discount on gas in addition to a $15 billion bailout.
Last month, the head of Russian state energy giant Gazprom said the company was annulling its discount on natural gas sales to Ukraine beginning in April. CEO Alexei Miller justified the decision by pointing out that Ukraine is $1.55 billion behind on payments for natural gas deliveries.

Commission welcomes breakthrough leading to gas flows from Slovakia to Ukraine.

European Commission, Press release, Brussels, 28 April 2014:

"The European Commission welcomes the signature of a Memorandum of Understanding (MoU) enabling gas flows from Slovakia to Ukraine, which is set to take place this afternoon in Bratislava. José Manuel Barroso, President of the European Commission, will attend the ceremony together with Slovakian Prime Minister Robert Fico and Ukrainian Energy Minister Yuriy Prodan.

  • The Commission acted as a facilitator in the negotiations that led to today’s breakthrough. Along with the MoU, the gas pipeline operators concerned – the Slovakian company Eustream and the Ukrainian company Ukrtransgaz – will sign a Framework Interconnection Agreement today, laying out the technical details of the foreseen solution. 

José Manuel Barroso, President of the European Commission, said: “I warmly congratulate all parties involved on the breakthrough in the negotiations on gas flows from Slovakia to Ukraine. This is an important first step to diversify Ukraine’s sources of gas supply and contributes to greater energy security in Eastern Europe and the EU as a whole. It shows the EU's strong commitment in support of Ukraine's energy sector, which is also reflected in the economic and financial package the Union has swiftly provided for Ukraine in the past weeks. I would like to thank Energy Commissioner Oettinger and his team, who played a central role in paving the way for today’s agreement."
  • Günther Oettinger, Commissioner for Energy, said: “Today’s deal marks a milestone. It is a first step for gas flows from Slovakia to Ukraine and strengthens the ties between the EU’s energy market and Ukraine. Gas via Slovakia will bring a considerable addition to the volumes that Ukraine can already import from Hungary and Poland. Deliveries from EU Member States offer Ukraine access to gas priced on the basis of fair and transparent principles. It is important in this respect that Ukraine, particularly as a member of the Energy Community, makes swift progress in aligning its legal and regulatory framework with the EU energy legislation. This will increase investor’s confidence and help the country to modernise its energy sector.”
  • Background
Currently, it is technically possible to ship gas from Poland and Hungary to Ukraine. Last year Ukraine imported around 2 billion cubic meters of gas from EU Member States.
Based on the solution which is presented in the MoU, the existing and unused Vojany pipeline at Veľké Kapušany on the Slovakian side will be modernised during a short construction period. There is a clear perspective that 22 million cubic meters of gas a day can flow from Slovakia to Ukraine via the Vojany pipeline as from autumn 2014. This corresponds to approximately 8 billion cubic meters a year. Eustream will swiftly check some technical details in order to be able to confirm the implementation of this solution within a few weeks. Should this option unexpectedly prove not to be feasible, the alternative would be to start with a smaller volume and scale the pipeline up to 22 million cubic meters a day until April 2015.
The successful implementation of gas flows from the EU to Ukraine is a win-win situation for both parties. It allows Ukraine to access various gas sources – among them Norwegian gas or liquefied natural gas (LNG) from the global markets – at competitive prices. As a member of the Energy Community, Ukraine will ensure the implementation of the EU internal energy market legislation. The approximation of the Ukrainian legal and regulatory framework is a prerequisite for higher investor’s confidence and could lead to a better use of Ukraine’s immense gas infrastructure, for example as regards storage capacity.
However, the solution which has been sealed today is only a first step in enabling gas flows from Slovakia to Ukraine. Further options besides using the Vojany pipeline will be legally and technically assessed in due course."

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