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Tuesday, October 25, 2016

Gas “independence of Ukraine” hiding corruption schemes

Ukraine has finally officially recognized that the Kiev government lied about the price of Russian gas. Gazprom’s fuel, according to the energy Ministry of the country, much less the so-called European, but Kyiv time, said the exact opposite. Cost overruns threatens to disrupt the transit of Russian gas to Europe.

Thousand cubic meters of European gas cost Kiev $ 45 more expensive than supplies from Russia, said the head of Ministry of Ukraine Igor Nasalik the TV channel “112 Ukraine”.

“If Ukraine bought natural gas imports in the EU, and Russia, she would be better prepared for the heating season and it wouldn’t have cost her not one more dime”

“If we talk purely on gas, I again want to reiterate that we have not taken a single cubic meter of gas from Russia. Yes, we pay more because we pay for transit through Ukraine, and across Europe and back, and today the price is $ 185. Direct contract with Russian the price would be $ 140,” said Nasalik, RIA “Novosti”. According to him, such is the price of “Ukraine’s independence from Russian gas.

Ukraine stopped buying gas from Russia at the end of November 2015, but it buys transit gas to the EU, with Kiev repeatedly claimed that this cheaper option. In Russia over such statements were laughing – and now Ukraine has officially confirmed that previously lied about “cheaper gas from Europe.”

And it is clear. After Gazprom announced a gas price for Ukraine in the third quarter based on the contract, Ukraine has become difficult to deny the basic facts: she buys more expensive gas via European mediators, although they could save by buying it directly from Gazprom.

Recently, the head of Naftogaz Andrew KOBOLEV also acknowledged that Ukraine has to buy gas in Europe in the third quarter more expensive than they could buy from Russia. But the numbers he called. Kobolyev took the question aside, saying that it is not in the price, and the signing of an additional agreement, without which Kiev considers it impossible to buy gas from Russia.

In June, Gazprom received from Naftogaz’s request to resume delivery. To which Gazprom responded that the resumption of gas supplies from Russia to Kiev, it is sufficient to make a prepayment. However, the Ukrainian company has put a condition – it is necessary to sign an additional agreement to the contract will be fixed price for the next three quarters. Kiev tried to cheat, forcing Gazprom to rewrite the contract and to freeze the minimum gas prices by 9 months.

Why is Kiev, demanding from the “aggressor” in the literal sense such an expensive gift for yourself? Because he understands that the auction of unprecedented generosity Gazprom for Ukraine’s long gone. Thus Kiev artificially created a reason to justify the continuation of the procurement of more expensive reverse gas.

As Ukraine makes Russian gas evropeiskoye citizens of Ukraine is clearly unhappy with a tenfold increase in gas prices, the country has passed a so-called tariff riots. Difficult to explain to a pensioner, why pay for gas and imaginary independence from Russian fuel, when his pension is not enough even to pay utility bills. About this high price of Ukraine’s independence from Russian gas neither COBOL nor Nasalik do not remember. The irony is that the more expensive reversible gas origin is still Russian.

The price of reverse gas for Ukraine is the price at the gas hub of Europe plus transportation costs and supplier margin, and that an additional 20-30 dollars per thousand cubic meters and more, not just experts. The price of gas on the spot market differs little from the price of Russian gas, and this category is also unstable. If the cost of gas contract with Gazprom depends on the dynamics of oil prices on the spot market from supply and demand. In the summer, when demand is low, prices are less, but during the heating season can jump very high.

Actually Kiev with his rhetoric tries to hide financial problems and to look away from the new corrupt schemes of obtaining income from the resale of Russian gas.

Ukraine has no money to buy cheap Russian gas directly from Gazprom. Reversible gas Naftogaz buys on a credit of 300 million dollars allocated by the EBRD. However, to buy gas for these funds Ukraine can only on the Western border and European companies. The European Bank not only earns interest, but also helps to earn extra money to European traders. It is known that Naftogaz had 3 of the tender and signed a 3 contract, which will pay European companies 183 million dollars of credit funds of the Bank.

While Naftogaz still has its own funds, at least from Gazprom, which pays for the transit service. That is part of gas, the Ukrainian company buys for their money. However, Naftogaz still prefer to buy the more expensive reverse gas. So, someone such schemes profitable.

The head of Ministry of Ukraine failed to include in the price of the “independence” of Ukraine on Russian gas is another option – the threat of disruption of the heating season and gas crisis. This winter such risks have increased.

Recently Naftogaz announced that it plans to accumulate in underground gas storages for the heating season 2016-2017 about 14.5 billion cubic meters. According to KOBOLEV, these reserves will be enough for comfortable passing of winter. However, this is an extremely dubious assertion.

In March, the Ukrainian Ministry of energy itself has estimated the necessary reserve of gas in underground storage facilities for the heating season (mid October) to 17 billion cubic meters. The EU warned that for the normal passage of winter have still more than 19 billion cubic meters. But in Kiev, stood his ground, justifying a lower level of injection into underground storage facilities by reducing gas consumption by 2 billion cubic meters. The fall in consumption in the Ukraine is really the place to be because of the crisis and the fall in industrial consumption.

Ukrainian experts themselves claim that to guarantee the passage of the heating season and to ensure the transit of gas to Europe without contingencies remains possible only with UGS 17 billion cubic meters of gas.

Where did the energy of the new “comfortable” level of injection into underground storage facilities to 14.5 billion cubic meters? In fact this estimate is based only on how much real Naftogaz will be able to upload to store by mid-October for the remaining two months. On August 22, UGS was 11.9 billion cubic meters. On August 6, UGS was about 11 billion, that is 16 days was pumped 900 million cubic meters. Before the heating season was 54 days (October 15). Under the same injection rate as the time it turns out that for the remaining time, Naftogaz will be able to get to 14.5 billion cubic meters.

For comparison, Ukraine began selection of gas from underground storage facilities in the last heating season of 2015-2016 if you have stocks in a little over 17 billion cubic meters. The 2014-2015 heating season – when stocks 16.8 billion cubic meters. Both winter was warm plus was actively purchasing imported fuel, including from Russia. Now Kiev is going to go through the winter without pads if you have stocks in underground storage facilities at the level of 14.5 billion cubic meters. What kind of warm weather in December, January and February, this time counting Ukrainian officials? Gazprom has already warned the EU that does not preclude the risk of interruptions of gas transit through Ukraine this winter because of the low level of fuel reserves in Ukrainian underground storage facilities. Will suffer from this in the first place, European consumers, but the EU is pretending not to notice the threat of a repetition of the gas crisis of 2008-2009.

A rough calculation shows that if Ukraine bought natural gas imports in the EU, and Russia to pump it into underground storage facilities, it would be better prepared for the heating season and it would have cost her less.

Thus, Ukraine has completed the selection of gas from underground storage facilities this winter, on 6 April, with reserves of 8.5 billion cubic meters (a large part is a technical gas that cannot be pumped out). To achieve the level of 14.5 billion cubic meters by the beginning of the heating season, we need to buy 6 billion cubic meters of gas. This year for injection into storage, Kiev buys only reverse fuel from the EU, which is more expensive than Russian supplies.

It turns out that for 6 billion cubic meters of the Naftogaz will pay Europe $ 1.1 billion (price of a thousand cubic metres – $ 185). If Kiev bought Russian gas directly from Gazprom, it could save $ 260 million and pay only 840 million dollars for the same 6 billion cubic meters. Saved $ 260 million would be enough to purchase an additional 1.9 billion cubic meters of gas which could be pumped into underground storage facilities. Then in the Ukrainian UGS at the beginning of the heating season would not be at 14.5, and 16.4 billion cubic meters, which is much closer to the optimal level of 17 billion cubic meters. The calculation is approximate since the quarterly price of reverse Russian gas was varied and was not static. However, the reversible gas was always more expensive.


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