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10/12/2016

Sefcovic embarks on third trilateral gas talks on Ukraine

Energy

Sefcovic embarks on third trilateral gas talks on Ukraine

Maroš Šefčovič

[European Commission]

Vice-President for the Energy Union Maroš Šefčovič said he will visit Kyiv on 2 September to discuss energy reforms and lay the groundwork for trilateral talks with Ukraine and Russia that he hopes will help ensure uninterrupted gas supplies in the winter.

For a third consecutive year, the EU will mediate between Ukraine and Russia in securing Ukraine’s gas purchases from Russia, which are also needed to secure the transit of Russian gas to the EU.

The European Union is eager to mediate between Kyiv and Moscow, because in 2009, when Gazprom stopped deliveries to Kyiv, the country used gas destined for Europe for its own domestic consumption, and left several EU countries in the cold.

In the summer period, Ukraine’s underground gas storage needs to be filled, with the replenishment usually taking place until mid-October. The underground gas storage is needed not only for domestic use, but for ensuring transit.

There are 12 billion cubic metres (bcm) of gas in Ukraine’s underground storages right now. Reportedly, Ukraine wants to bring the level  at 14.5 bcm. The Commission prefers a higher level, up to 16 bcm, to be on the safe side in case of a harsh winter.

The European Union relies on Russia for around a third of its gas. More than half of that arrives via Ukraine, but since ties between Russia and Ukraine hit rock bottom over Moscow’s annexation of Crimea from Kyiv in 2014, the potential for disputes over pricing and other issues has accelerated.

Ukraine, Russia and the European Union signed a deal in October 2014 that allowed Moscow to resume vital supplies of gas to its ex-Soviet neighbour over the winter, in return for payments funded in part by Kyiv’s Western creditors.

A similar deal was signed in September 2015. However, for the first time, during the winter of 2015-2016, Ukraine did not purchase gas from Russia. Naftogaz has used reverse gas flows from its EU neighbours instead.

Last July the new Ukrainian government requested the Commission’s mediation for securing its gas purchases from Gazprom.

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“Despite a very difficult situation, especially in east Ukraine, the transit route through Ukraine has been working well. We consider it a priority that this route is fully operational this winter as well,” Šefčovič told a group of journalists yesterday (30 August).

He said he would discuss the issue with Ukrainian officials, including the Prime Minister Volodymyr Groysman. He said that “hopefully” he would also hold talks in Moscow, to better understand the positions of the sides and figure out how exactly the Commission could help.

Asked to comment the announcements that the Turkish Stream project could be revived, he said that he would advise with patience with such announcements, because in his words there had been too much back and forth over the issue of bringing Russian gas to Europe under the Black Sea.

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He said that the existing capacity of bringing Russian gas to Europe was at little over 50%, so there was a lot of unused capacity.

“That’s why we are always asking the question of the commercial viability and the real needs for additional routes”, he said.

He said he had been in touch with the Turkish energy minister on another project, which is of interest for the EU – the Southern gas corridor (SGC).

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“He [Berat Albayrak] reassured me that they are fully aware of the importance of this project, which is very important also for Turkey, because it ensures diversification, and that we should see the gas from the Caspian basin flowing into Europe before 2020”, he said.

Asked about Bulgaria’s ambitions to secure a gas hub, the Commission Vice President said the Commission was working very well with the Bulgarian authorities and that the next meeting of the High Level Group on Central and South Eastern Europe Gas Connectivity (CESEC) would be held in Budapest next week.

CESEC was set up in 2014 largely as a response to Bulgarian concerns over the country’s vulnerability in case of crisis.

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Bulgarian Prime Minister Boyko Borissov paid a visit to the European Commission today (12 January) to sound the alarm over his country’s energy resources, following the freezing of the South Stream project. In particular, he warned that if Russia drags its feet over the rehabilitation of Bulgaria’s two nuclear reactors, this would be a “catastrophe” for the country.

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A new study has found that following the 2009 Ukrainian gas crisis, Europe is better prepared to deal with a such disruption than before. Only Bulgaria would be incapable of substituting imports during a short supply interruption.

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Šefčovič  was asked about the state of play with Nord Stream 2, the controversial project to double the capacity of Russian gas brought offshore from Russia to Germany, after the Polish anti-monopoly watchdog rejected the project and after the Western partner companies walked away, as a consequence of this decision.

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The legitimacy of the extension of the Nord Stream 2 gas pipeline between Russia and Germany is being seriously undermined by regulatory and political headwinds, writes Jack Sharples.

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He said that the Commission position remained unchanged, namely that this joint venture should be fully compliant with EU law, that it could not be built in legal void, or exclusively on Russian law, and that a “legal vehicle” was needed to make sure that core principles of EU law be reflected. The Intergovernmental Agreement would be the best approach according to the Commission, but Germany had other ideas, the Commission Vice President.

“We are waiting for the ideas from the German side, how they want to solve the issue”, he added.

Sefcovic sheds light on Nord Stream 2 negotiations

Speaking to a group of journalists yesterday (19 April), Commission Vice-President Maroš Šefčovič, in charge of the Energy Union, shed light on the ongoing negotiations to reconcile the Nord Stream 2 pipeline project with EU legislation.

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