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30/09/2016

Brussels talks avert another Ukraine gas crisis

Europe's East

Brussels talks avert another Ukraine gas crisis

Alexander Novak and Maroš Šef?ovi? [European Commission]

Russia and Ukraine have agreed to discuss a “summer package” of gas supplies late this month, with Kyiv winning an assurance at Monday’s EU-mediated talks in Brussels that it would not pay for energy delivered to rebel-held areas.

A “winter package” of Russian gas for Ukraine, brokered and part-financed by the European Union, runs out at the end of the month. EU officials are mediating after mutual allegations of reneging on the deal and want to arrange summer supplies despite the conflict over the pro-Russian revolt in eastern Ukraine.

European Commission Vice President Maroš Šef?ovi?, who chaired the talks, said a further meeting before the end of March would discuss arrangements to follow on from the current pact. “We managed to safeguard the full application of the winter package for the supply needs in Ukraine,” he added.

Referring to concerns that disruptions could have a knock-on effect for Russia’s EU customers, he said, “I am reassured that the supply of gas to the EU markets remains secure.”

Russian Energy Minister Alexander Novak said in comments from Brussels broadcast on state television, “We agreed to discuss supplies during the summer, issues related to gas injection into underground storages, at the end of March.”

Ukraine’s state gas company Naftogaz said in a statement: “The parties confirmed that for accounting purposes for the ‘winter package’, only those volumes of gas delivered through gas reception points agreed with Ukrtransgaz would be counted.”

Novak made similar comments in reference to Ukrainian complaints that Russia’s Gazprom was delivering gas to rebel-held areas in Donetsk and Luhansk regions and under-supplying Kyiv under the terms of the winter package. Šef?ovi? said the issue was complex and would be reviewed again.

http://www.euractiv.com/video/sefcovic-eu-gas-supply-secure-312572

Before the talks Novak had rebuffed Ukrainian accusations that Gazprom was holding back on deliveries and said Kyiv’s credit under the four-month winter deal could run out this week.

Previous “gas wars” between the ex-Soviet neighbours have seen supplies disrupted not only to Ukraine but beyond into the European Union, which obtains nearly a third of its natural gas from Russia, half of that delivered by pipelines across Ukraine.

However, despite a warning last week from Russian President Vladimir Putin that Ukraine’s chaotic finances might cause energy shortages across Europe, analysts have played down the risks of disruption going into summer. They have noted Ukraine’s own gas output and Russia’s need to sell its gas.

Novak said Ukraine’s credit may last only to the end of the week – if it keeps demand at about 10 million cubic metres a day. Ukrainian gas transport monopoly Ukrtransgaz said it ordered that amount on Sunday, but only received 5.8 million.

Moscow cut off supplies to Kyiv in June and restored them in December in a dispute over pricing and unpaid bills.

The European Commission listed the conclusions as follows:

– Winter package to be fully implemented: Naftogaz will pre-pay and order from Gazprom sufficient quantities of gas to cover all domestic consumption by Ukraine in March; Naftogaz continues to guarantee an undisrupted transit of gas to the EU; Gazprom will deliver up to 114 million cubic metres per day of pre-paid and ordered gas quantities to mutually agreed delivery points.

– The issue of supplies to certain areas of Donetsk and Luhansk regions in eastern Ukraine is highly complex in legal, technical and political terms; the issue will be discussed again

– A further package on supply will be discussed; the Commission will host another meeting before the end of March.

Background

A new conflict between Gazprom and the Ukrainian Naftogas came to light last week. Naftogas accuses Gazprom of violating an EU-brokered gas supply protocol known as “the winter package” and of not supplying prepaid gas to Ukraine. What appears to be happening is that Russia is supplying separatist regions with gas prepaid by Kyiv, instead.

>> Read: Gazprom warns of ‘serious risks’ for gas transit to Europe

On his last day in office as Energy Commissioner in November, together with his Russian and Ukrainian counterparts, Günther Oettinger signed a “winter package”, essentially ensuring prepaid gas to Ukraine until the end of March. No mention of “summer package” has been made so far.