Russia's Gazprom to Supply Up to 114 Mil cu m/d Gas to Ukraine: EC

Russian gas giant Gazprom has committed to deliver up to 114 million cubic meters/day of prepaid and ordered gas to "mutually agreed" points in Ukraine until the end of March, European Commission vice-president for energy union Maros Sefcovic said late Monday.

At the same time, Ukrainian gas company Naftogaz has committed to pre-pay and order from Gazprom enough gas to cover all Ukrainian demand in March, and to continue to guarantee undisputed transit of Russian gas to the EU, Sefcovic said.

The commitments follow Sefcovic's meeting in Brussels Monday with Russian energy minister Alexander Novak and Ukrainian energy minister Vladimir Demchyshyn to discuss gas supply security.

The gas is to be delivered under the terms of the EU-brokered winter package supply deal signed by Russia and Ukraine last October and which runs until the end of March.

POST-WINTER GAS TALKS

"We also agreed to take up trilateral negotiations on the follow-up to the winter package," Sefcovic said after the meeting. The EC has invited Russia and Ukraine to submit proposals for possible agenda points for the next trilateral meeting, which the EC would like to organize before the end of March.

"We need to cover the period from March to when the Stockholm arbitration court makes its ruling," Sefcovic told an industry event in Brussels Tuesday.

Gazprom and Naftogaz lodged counter-claims with the court last year about their 2009 long-term gas supply contract, focused on a gas price and debt dispute. The court is expected to rule on this in 2016.

The winter package, which took six months to agree, involved temporary changes to the 2009 contract until the end of March.

These included suspending the take or pay clause and Ukraine prepaying for the gas instead, and Russia giving Ukraine a $100/1,000 cu m price discount.

These are two of the issues Sefcovic said he would like to discuss for the post-winter package supply, along with how to ensure Ukrainian gas storage is restocked over the summer.

Ukraine needs around 18-20 Bcm in storage before the winter starts to be sure it can meet its own needs and provide stable transit for Russian gas supplies to the EU, he said.

Ukraine had refilled its storage to 16.76 Bcm by October 20 last year, despite not receiving any Russian gas since mid-June.

The current storage level is 8.1 Bcm, and will be less by the end of this winter, so Ukraine will need to put about 14-15 Bcm into storage by next winter, Sefcovic said.

Some of this gas could come from the EU, through reverse flows from Hungary, Poland and Slovakia, but Ukraine would also need Russian gas supplies this summer, Sefcovic said.

SUPPLIES TO CONFLICT REGION

Russia and Ukraine have also agreed to keep the issue of disputed Russian gas supplies to the separatist-controlled Donetsk and Lugansk regions in eastern Ukraine separate from the winter package terms, Sefcovic said.

Gazprom said February 20 that it had started delivering gas to these regions directly, after the Ukrainian government had cut supplies citing grid damage caused by the conflict.

Gazprom had originally said it would deduct these deliveries from Ukraine's prepaid supply balance, warning that this could run out in a matter of days if Ukraine did not top it up with more payments.

Ukraine has refused to pay for deliveries to regions it does not control, however, only for deliveries to points it has specified.

Both Ukraine and Russia acknowledged Monday that the supply to these conflict regions was "highly complex in legal, technical and political terms," Sefcovic said.

"I appreciate Russia's acceptance that any gas supplied [to these regions] will not be counted from Ukraine's prepaid gas balance for delivery to agreed points," he said.

The EC remains ready to assist with expert advice on resolving the issue if Russia and Ukraine request it, he said.

(Platts)