Gazprom pipelines and export capacity

Газопроводы Газпрома и экспортные мощности

Gas pipelines of West Siberia

Газопроводы Западной Сибири

Export flows of Gazprom

Экспортные потоки

Spot, Gazprom, Brent

Цены на нефть и газ

End-use price of gas

Russia and USA

Daily gas production

Суточная добыча


Russian-Ukrainian Gas Dispute


Gas siphoning may start in mid-January

If Gazprom cuts gas sales to Ukraine, European exports will stay unaffected for the period of 10-14 days. In the second half of January 2009, daily export flows of Russian gas to Europe can drop by 45-50 million cubic meters (mmcm). Table 1 shows average daily gas balances of Ukraine for the month of January of 2006-2008, December 2002 and our projections for January 2009.

Table 1. Ukrainian Gas Balance, mmcm/day

 

12.2002

01.2006

01.2007

01.2008

01.2009А

1-10.01.09

11-31.01.09

 INPUT:

 

 

 

 

 

 

 

 Production
53

58

59

58

59

59

59

 Storage withdrawal
160

120

77

135

160

222

175

 Import

502

536

480

534

382

320

320

 Total:

715

714

615

727

601

601

554

 OUTPUT:

 

 

 

 

 

 

 

 Consumption

352

343

266

325

270

270

270

 Transit to:

 

 

 

 

 

 

 

 - Russia

2

1

0

-

-

-

-

 - Moldova

12

12

11

13

11

11

11

 - Europe

350

358

338

388

320

320

273

 Total:

715

714

615

727

601

601

554

 Average t C, Kiev

-7.4

-8.2

+2.2

-2.9

-3 - -4

-3 - -4

-3 - -4

01.2009А - Average daily balance of January 2009 in case of uninterrupted supplies of gas to Ukraine.

1-10.01.09 - Average daily balance for the period from January 1 to January 10, 2009.

11-31.01.09 - Average daily balance for the period from January 11 to January 31, 2009.

Underground gas storage facilities (UGSF) of Ukraine have the maximum daily withdrawal rate of 245-250 mmcm. Fully filled UGSFs can deliver 220-225 mmcm/day for the period of 10 to 14 days. After that, UGSFs can withdraw 170-180 mmcm/day for another 25-30 days. By the winter season of 2008-2009, Ukrainian UGSFs got the record volumes of stored gas. Because of the warm weather, gas withdrawal started in the end of November. Usually, the withdrawal starts 5-6 weeks earlier.

The negative effect of the anticipated cut of gas supplies to Ukraine is partly neutralized by the declining demand in Ukraine and Europe. Combination of the economic crisis and warm weather has resulted in the 30% drop of Russian gas exports to Europe in November 2008 compared to November 2007. Note that in November 2008, gas exports to Europe were 19% lower than in the warmer November 2006.

Gas sales in Ukraine are falling even faster. In November 2008, the metallurgical sector of Ukraine consumed 53% less gas than a year ago. Actual gas exports to Europe and Ukrainian consumption may be lower than projected in Table 1. Naturally, the use of gas for heating purposes depends on the weather, which is hard to predict.

We anticipate the Russian-Ukrainian gas dispute to cause a very moderate drop in the supplies of Russian gas to Europe. The deficit caused by illegal siphoning of Ukraine can be compensated by the additional withdrawal from European gas storage facilities.

Mikhail Korchemkin, Managing Director

December 26, 2008

NOTE

There is absolutely no doubt that Ukraine has to pay for gas it has received from Gazprom. However, Gazprom and Ukrainian NAK Naftogaz should consider simple ways of solving the debt problem, such as an advance payment for gas storage services. The minimum European UGSF tariff is $120 per 1000 cub.m (mcm), while the Ukrainian tariff is set at the ridiculous level of $5/mcm. Currently, UGSFs of Ukraine have 11-12 billion cubic meters of gas owned by Rosukrenergo and Gazprom. The real market value of storage contract of this size is at least $1.3 billion. In our view, Naftogaz could write off over $1 billion of its debt as an advance payment for the future withdrawal of gas owned by Rosukrenergo and Gazprom. The market price of Russian gas should be matched by the market tariffs for gas transit and storage in Ukraine.


Last modified: 12/07/14                    East European Gas Analysis 2006-2014                                           Email: info@eegas.com
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