ICIS webinar - Role of ukraine in russian gas supply to europe

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Political tensions between Russia and Ukraine had an effect on European natural gas sector in the first quarter of this year. Ukraine still transits more than 50% of total Russian gas supplies to Europe. The relationship between the two countries will continue to be key for Russia as a supplier and have impact on its relations with Europe – currently Russia’s sole market for gas. http://www.icis.com/resources/

Transcript of ICIS webinar - Role of ukraine in russian gas supply to europe

  • 1.www.icis.com Role of Ukraine in Russian gas supply to Europe Katya Zapletnyuk Editor, European Gas Markets

2. www.icis.com Ukraine between Russia and Europe Role of Ukraine as a transit country for Russian gas Ukraines storage and pipeline network Ukraines efforts to diversity its own gas supplies through reverse flow from Europe Impact of the Russia-Ukraine crisis on European gas hubs 3. www.icis.com Ukraine key facts Annual demand in 2013 48.8bcm Ukraines gas imports in 2013 Russia 25.84bcm (estimated price $413.5/1,000cm) Europe 2.13bcm (estimated price $401.65/1,000cm) Domestic production 20bcm Transit of Russian gas to Europe: 2009 93bcm/year 66% of total Russian exports 2013 85bcm/year 52% of total Russian exports 4. www.icis.com Gas production and consumption in Ukraine Source: Naftogaz 5. www.icis.com Ukraine as a transit country Ukraine historically transported 80% of Russian gas to Europe Despite increased overall gas deliveries to Europe in 2013 share of Ukrainian transit dropped to 54%. (Russian exports to Europe totalled 162.7 bcm up 16% compared to 2012). This trend continued in Q1 2014 with transit via Ukraine dropping 9% year on year to 17.67bcm Gazprom predicts transit through Ukraine to be around 70bcm in 2014 from 85bcm in 2013 6. www.icis.com Ukrainian transit system and storage Ukrainian storage sites are important for secure gas flows to Europe during winter Ukraine started publishing its storage data on the GSE transparency platform in May, 2014 Ukraine has 12 storage facilities of some 30bcm located near the western border of Ukraine Ukraine needs to have at least 19bcm of gas in storage in the beginning of the winter season to enable smooth transit to Europe Gas volumes held in Ukrainian storage came to 12.614bcm as of 6 June, 2014 7. www.icis.com Other pipelines transporting Russian gas Yamal-Europe (33bcm/year) and Nord Stream transport Russian gas to Europe bypassing Ukraine. Plans exist for South Stream. Yamal-Europe transits gas via Belarus and Poland. Nord Streams second string was commissioned in October 2012, doubling its capacity to 55bcm/year. Nord Stream flows gas between Russia and Germany under the Baltic Sea Germany has increasingly become a transit country for Russian gas in 2013. Total supply to the country was 38% higher than consumption, data collected by ICIS shows Southern states including Romania, Bulgaria, Greece and Turkey are significantly more dependent on Ukrainian transit 8. www.icis.com Russian gas pipelines to Europe 9. www.icis.com Russia-Ukraine payment dispute Russia and Ukraine signed a 10-year supply agreement in 2009 Russia then provided two discounts. One of an about $100/1,000cm in exchange for extension to Black sea fleet lease in Crimea. In Q1 14 Gazprom offered another discount bringing the price to $268.5/1,000cm From April 2014, Russia rescinded all discounts and the price for Ukraine rose to $486.5/1,000cm. 10. www.icis.com Russia-Ukraine payment dispute Ukraine accumulated payment arrears in the end of 2013 and Q1 14 despite the price decrease Ukraine also rejected the $486.5/1,000cm price and threatened to take Gazprom to the Stockholm court of arbitration Gazprom invoked the pre-payment mechanism for Ukraine in the existing contract from June 2014 and said it will cut supplies if no pre-payment is made. The deadline has been moved several times, last time to 16 June 11. www.icis.com Russia-Ukraine payment dispute On 30 May, Naftogaz paid Gazprom $786m for gas supplied in February and March The deadline for supply cut-off was moved to 16 June Trilateral talks continue involving Russia, Ukraine and EU representatives On 6 June Gazprom offered Ukraine a new discount but the Ukrainian government rejected it as it wants to re- negotiate the entire contract 12. www.icis.com Reverse flow to Ukraine Ukraine is unhappy with the price of Russian gas in its long-term contract and has been trying to import gas from Europe In 2013 Ukraine imported 2.13bcm of reverse flow gas from Hungary and Poland Imports from Europe stopped after the Russian discount was granted at the end of 2013, which made imports from the West uneconomic. Reverse flow could start in autumn via the Vojany pipeline of 8bcm/year 13. www.icis.com Reverse flow from Slovakia Slovak reverse flow project is politically supported by the EU Gazprom de-facto controls the Ukrainian side of the Velke Kapusany border point blocking virtual reverse flow Slovakia and Ukraine signed reverse flow MoU on 28 April 2014 Eustream on 26 May announced an Open Season for physical reverse flow from Slovakia to Ukraine and has received interest from shippers Open season for reverse flow held in 2013 did not indicate interest on part of shippers 14. www.icis.com Reverse flow capacity into Ukraine Poland 4-5mcm/day (1.4-1.8bcm/year) Hungary 9.6mcm/day (3.5bcm/year) Slovakia 22mcm/day (8bcm/year) 15. www.icis.com Dutch TTF price reaction 23 23.5 24 24.5 25 25.5 26 26.5 27 27.5 28 03/02/2014 10/02/2014 17/02/2014 24/02/2014 03/03/2014 10/03/2014 17/03/2014 24/03/2014 31/03/2014 07/04/2014 14/04/2014 21/04/2014 28/04/2014 /MWh Winter '14 Winter '15 3 March Reports of Russian troops activity in Crimea 1 April Gazprom rescinds December 2013 price discount for Ukraine 7 April protests flared up in Eastern Ukraine 16. www.icis.com Conclusions Russia has been displacing gas to bypass Ukraine as a transit country Ukraine needs to inject enough gas into storage in the summer to secure European transit in the winter Ukraine tries to import gas from Europe via Poland, Hungary and Slovakia 17. www.icis.com Thank you! Contact: katya.zapletnyuk@icis.com