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Comments
on
Vladimir Putin's meeting with foreign media on
January 8, 2009
In my view,
the numbers given in
the presentation of
Russian Prime Minister Vladimir Putin support the position of Ukraine
rather than that of Russia. These and some other questionable issues
are addressed in the same order as they are in the presentation.
-
V.PUTIN:
"I would like to draw your attention to the fact that Ukraine,
for example, has been receiving gas at well below market prices.
While we sold gas to Western Europe at 100, 150 and 200 dollars
per 1000 cubic meters Ukraine received our gas at $40, 50 per
1000 cubic meters. Thus, only in the gas sphere, the Russian
Federation subsidized the Ukrainian economy to the tune of
about $47 billion over the past years."
COMMENT: The numbers
officially reported by Gazprom are different from the numbers of
Vladimir Putin. Table 1 shows the size of the "subsidies" in the
period when Mr. Putin was the Prime Minister and the President
of Russia. In 1999-2005, Gazprom was supplying gas to Ukraine at
$50/mcm as payment for transit services. There were no cash
transactions between Gazprom and Ukraine at that time. All other
volumes were sold by Itera and other companies. From
2006, Gazprom is buying Central Asian gas
and reselling it to Ukraine via Rosukrenergo. In 2006-2008,
Turkmenistan, Uzbekistan and Kazakhstan were subsidizing Gazprom
and Naftogaz.
Table
1.
Russia's "subsidies" to the Ukrainian economy in 1999-2005
|
|
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
Total |
Gas supplied by Gazprom, bcm
|
29.6
|
27.2 |
21.9 |
25.9 |
26.0 |
26.0 |
21.6 |
- |
Price of Gazprom's gas, $/mcm
|
50
|
50 |
50 |
50 |
50 |
50 |
50 |
- |
|
Ukrainian transit
cost, $/mcm (1) |
14 |
14 |
14 |
14 |
14 |
14 |
14 |
- |
|
European price of
gas, $/mcm (2) |
65 |
103 |
118 |
103 |
124 |
138 |
192 |
- |
|
"Subsidies", $ billion |
0.0 |
1.0 |
1.2 |
1.0 |
1.6 |
1.9 |
2.8 |
9.5 |
(1) At the official
transit tariff of $1.0937/mcm per 100
km.
(2) The average
price of European exports reported by Gazprom.
It is worth noting
that the gas storage facilities of Ukraine save Gazprom much
more than the so called "subsidies" (see
our comment of Jan-5-2009).
-
V.PUTIN: "By January 5 the
reductions of Russian gas supplies were felt in seven European
countries: the Czech Republic, Turkey, Poland, Hungary, Romania,
Bulgaria and Greece. We were notified that supplies of Russian
gas had dropped by 5-30%. By January 5 the volume of illegally
taken gas amounted to 65.3 million cubic meters
<..> By the way, between January 1 and 6, 86 million cubic
meters was stolen
<..> In the morning of January 6 Hungary, Bulgaria,
Turkey, Greece, Serbia, Slovenia, Slovakia and Romania stopped
receiving Russian gas. Gas supplies to France, Austria and
Germany were reduced significantly."
COMMENT: In my view, this
part of the talk is a real disaster because the numbers show how
insignificant was the gas loss in Ukraine. Statements of
Gazprom of Jan-4 and
Naftogaz of Jan-08 indicate that the average transit flow to
Europe in the first six days of January was equal to 239 mmcm/day
(mmcm = million cubic meters).
According to Gazprom, from Jan-1 to Jan-4, Ukraine has
siphoned 65.3 mmcm of gas, which is an equivalent of 16.3 mmcm/day
or less than 7% of the average daily transit flow. According to
V.Putin, in six days, 86 mmcm was stolen, which makes 14.3 mmcm/day
or 6% of the daily transit flow to Europe.
Table
2.
Transit flows through and the losses of Russian gas in Ukraine,
million cubic meters
|
|
Jan-1 |
Jan-1 |
Jan-2 |
Jan-3 |
Jan-1-4 |
Jan-1-6 |
Jan-1-6 |
Jan-1-6 |
Supplied by Gazprom
|
326
|
303.8
|
296 |
295 |
NA |
NA |
1488.2 |
1488.2 |
Flow to Europe
|
NA
|
305.7
|
NA |
270 |
NA |
NA |
1435.9 |
1435.9 |
Gas loss
|
NA
|
-
|
NA |
25 |
65.3 |
86 |
52.3 |
86 |
Average daily flow to Europe
|
NA
|
305.7
|
NA |
270 |
NA |
NA |
239.3 |
239.3 |
|
Average daily loss |
NA |
- |
NA |
25 |
16.3 |
14.3 |
8.7 |
14.3 |
|
Share of loss in
transit, % |
NA |
- |
NA |
8.5% |
NA |
NA |
3.5% |
5.8% |
|
Source of
information |
(1) |
(2) |
(3) |
(4) |
(5) |
(6) |
(7) |
(8) |
(1)
Gazprom statement of Jan-1.
(2)
Naftogaz: Russian Natural Gas Transit via Ukraine. Scheme
(excluding supplies to Moldova).
(3)
Gazprom statement of Jan-2.
(4)
Gazprom statement of Jan-4. The document also notes the loss
of 25 mmcm by Rosukrenergo.
(5)
Gazprom statement of Jan-5.
(6)
Presentation of Vladimir Putin on Jan-8.
(7)
Naftogaz: Statement of Jan-8.
(8) Share of losses
according to Gazprom.
From the standpoint of European
consumer, gas suppliy at 90-94% of the contractual obligations
is very different from the total cutoff. Viewing from Hungary,
Slovakia or Czech Republic, a low pressure in the Balkan
pipeline (that supplies gas to Romania, Bulgaria, Greece, Turkey
and Macedonia) is not a good reason to turn off gas supplies to
other export pipelines.
It looks like the Russian
government considered the loss of 6-7% of the transit flow as
the reason for the total cutoff. The loss is not
irretrievable. Gazprom can get back its lost profit in the
Arbitration Court of Stockholm. However, the insignificance of
the size of siphoning may indicate that the loss of gas was not
the reason, but an excuse to stop the gas exports.
Please note that Vladimir Putin's
statement on the halt of gas deliveries to
Hungary, Bulgaria, Serbia, Slovenia, Slovakia and Romania
on January 6 and Mr. Putin's numbers do not match. From Jan-5 to
Jan-6, Ukraine has siphoned 20.7 mmcm of transit gas (86 - 65.3 = 20.7).
The minimum daily flow to the named countries (excluding Turkey
and Greece) is twice bigger than that.
Russia and Ukraine are facing
trials on the transit volumes and volumes of gas used at
compressor stations of Naftogaz. We estimate the demand of fuel
gas for the transit of 240 mmcm/day at 8-9 mmcm/day.
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V.PUTIN: "If Ukrainian
neighbours in the European Union pay an average $470 per 1000
cubic meters in the first quarter, it is clear how much Ukraine
has to pay if one subtracts from that price the cost of transit
to the Western border of Ukraine."
COMMENT: Among dozens of
contracts of Gazprom, there may be one or two with that high
price of gas (most likely, it is a contract with a country that
does not have access to alternative sources of gas, or it is a
contract with a low level of take-or-pay volume). We estimate
the average price of European exports of Gazprom in the 1st
quarter of 2009 at $384/mcm. The actual price will be published
in the corresponding financial statement of Gazprom.
The Ukrainian price of gas must
reflect the seasonal factor. Gazprom produces as much gas as it
can sell. In summer time, the average daily production stands at
1250 mmcm, in winter at 1650 mmcm. If Ukraine stops injecting
gas in its storage facilities in summer time, Gazprom would be
unable to sell this gas to anybody because of the lack of demand
(all underground gas storage facilties in Russia and in Europe
are injecting gas at the maximum rate anyway). There are no
other buyers of "summer gas" in Russia or in Europe. Moreover,
the Ukrainian storages help Gazprom to create spare pipeline
capacity for winter flows of gas, when the fuel demand is high.
-
V.PUTIN: "I regret to say
that it indicates a high level of corruption in Ukrainian
government structures which today are fighting not over the gas
price, but for the possibility to keep certain mediators in the
game in order to use the dividends for personal enrichment and
to raise the necessary funds for future political campaigns."
COMMENT: I agree.
Rosukrenergo is a corrupt scheme.
Indeed, Gazprom defines the size of the profit of Rosukrenergo
(RUE) by giving the Swiss broker allowances to export gas to
Europe. RUE is not competing with Gazprom in European markets.
RUE exports as much gas as needed to provide its Ukrainian
shareholders (Messrs D.Firtash and D.Fursin) daily profits of
over $1 million, 7 days a week. The shareholders of Gazprom,
including the Russian Federation, get less profits,
respectively. It would be impossible to imagine that Ukraine has
forced Mr. Putin to give a gas export quota to RUE. It is also
hard to imagine that the executive director of RUE (who is also
a member of the Executive Board of Gazprom) runs an independent
policy in European markets and competes with his boss, Mr.
Alexey Miller, and with Mr. Miller's boss, Vladimir Putin.
When Rosukrenergo was founded by
Gazprombank and Raiffeisenbank,
Gazprom gave a promise to its shareholders that the
Swiss intermediary would invest money in the expansion of gas
transmission capacities along the route from Turkmenistan to the
Ukraine. In real life, RUE has not invested a penny.
All
profits were paid in dividends. Half of the dividends went
to lucky Messrs. Firtash and Fursin. Members of the Executive
Board of Gazprom who are also
members of the board of RUE have always voted for paying
dividends instead of investing profits.
Mikhail Korchemkin
January 9, 2009
ADDENDUM: Ukrainian "subsidies" in 2006
Table 1
ends in 2005, but the sales of Russian gas to Ukraine continued for one more
year. Table 3 shows quarterly volumes of sales and prices of these
transactions.
Table 3.
Russia's
"subsidies" to Ukraine in 2006
|
|
Q1 |
Q2 |
Q3 |
Q4 |
Total |
Sales of gas produced in Russia:
|
|
|
|
|
|
Volume, bcm
|
4.1
|
0.8 |
4.2 |
- |
9.1 |
|
Price, $/mcm |
230 |
230 |
230 |
- |
- |
|
Ukrainian transit
cost, $/mcm (1) |
20 |
20 |
20 |
- |
- |
|
European price of
gas, $/mcm (2) |
243 |
261 |
267 |
280 |
- |
|
"Subsidies", $
million |
-33 |
8 |
68 |
- |
44 |
Sales of Central Asian gas:
|
|
|
|
|
|
Volume, bcm
|
12.4
|
12.2 |
12.2 |
11.0 |
47.8 |
|
Price, $/mcm |
95 |
95 |
95 |
95 |
- |
|
Total
gas sales to Ukraine, bcm |
16.5 |
13.1 |
16.4 |
11.0 |
56.9 |
|
Gazprom's
export to Europe, bcm |
45.6 |
39.3 |
33.9 |
42.7 |
161.5 |
(1) At the transit
tariff of $1.60/mcm
per 100 km.
(2) The average
price of European exports reported by Gazprom.
In my view, the 2006
price of Russian gas for Ukraine was well above the market (or European
netback) price because the seasonal pattern of Ukrainian supplies and the
size of sales were not
taken into account. In Q2- and Q3-2006, Gazprom has delivered to Ukraine
29.5 bcm of gas and 27.5 bcm in the heating period of Q1- and Q4-2006 (more
in summer and less in winter). Exports to Europe went according to the
demand: in the heating period, Gazprom exported 15.5 bcm more than in Q2-
and Q3-2006. Gazprom was able to export more gas to Europe in winter because
Naftogaz has bought more gas in the summer and injected it into its
underground storage facilities. Naftogaz did and still does this big favor
to Gazprom and Rosukrenergo for free. Moreover, Naftogaz pays to its Russian
and Swiss partners for providing this valuable service.
In Q1-2006, Ukraine
"subsidized" Gazprom in the amount of $33 million. Calculated Vladimir
Putin's way, the total value of Russian "subsidies" in 2006 was $44
million. In 2007-2008, Gazprom was not exporting Russian gas to Ukraine.
Therefore, Russian gas could not subsidy the Ukrainian economy.
From 2006, Gazprom acts
as a gas broker between the Central Asian states and Rosukrenergo. The price
of Turkmen, Kazakh and Uzbek gas has nothing to do with the Russia's
"subsidies" to Ukraine.
In my view, the presence
of Gazprom or any other intermediary between the Central Asian producers and
Ukraine complicates the Russian-Ukrainian relations. In fact, Gazprom shows
a bad example of a transit country (Russia is the transit country for
Central Asian gas) buying all gas that gets into its territory and selling
this gas on its own terms. It is a paradox that Gazprom demands the
freedom of an interrupted gas transit through all countries while there is
no freedom of gas transit in Russia.
Mikhail Korchemkin
East European Gas
Analsysis
January 17, 2009
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