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Saturday, October 22, 2016

Ukraine threatens communal Abraham

Although Kiev has started to prepare for winter in advance, it is clear that this winter will be difficult. Ukraine significantly lacks coal and gas fuels will have to buy, but funds for this to take, shifting some of the costs on the population. At the same time without help to blame Russia for the Ukrainians not to do this time.

By 2020 Ukraine can completely abandon the import of gas, said Russian Prime Minister Vladimir Groisman. But in the next few weeks he will decide the standard for the country autumn challenge – emergency preparation for winter. In the event of early onset of cold weather Ukrainian authorities have made a decision that traditionally has been very unpopular.

With an outstretched hand

“Bioenergy Association of Ukraine has counted more than 4 thousand coppers on the wood, over 100 boilers on straw and about 70 boilers on sunflower husk”

In the middle of last week the Ukrainian Cabinet of Ministers instructed the company Naftogaz of Ukraine by November 1 to increase the inventory of gas in storage to 17 billion cubic meters, while the planned amount did not exceed 14.5 billion cubic meters. The figure of 17 billion in early September, called in an interview to TV channels and Russian energy Minister Alexander Novak, noting that Ukraine is behind schedule the injection of gas into underground gas storage (UGS) for about 2 billion cubic meters (at the time in Ukrainian underground storage facilities was 12.8 billion cubic meters of gas). A few days before that, the concern for the security of Ukraine’s gas was expressed by the head of “Gazprom” Alexey Miller, has admitted that the Ukrainian side will again be selected for own use gas, going transit to Europe.

Schedule of bringing gas reserves to 17 billion cubic meters shall be approved by the Ukrainian ministries and agencies till September 15. The increase in volumes necessary for the safe passage of winter, will require from Kiev considerable additional funds, which “Naftogaz of Ukraine” expects to borrow from the world Bank. In summer, Naftogaz held negotiations on the granting of the trust loan in the amount of $ 500 million, but getting this money depends on how successful will be the negotiations with the IMF. This is not the first time Kiev has to borrow gas from international financial institutions, in October last year, the purchase of additional volumes was carried out through a loan worth $ 300 million from the European Bank for reconstruction and development.

A separate question: who will Ukraine to purchase additional gas. As you know, since last November, it ceased direct purchases from Russia, though in fact continues to use the Russian “blue fuel”, which goes to Ukraine by reverse from EU countries (primarily from Slovakia). The price of the gas “independence” at the end of August called on television the Minister of energy of Ukraine Igor Nasalik: thousand cubic meters of European gas costs $ 45 more expensive than the Russian (185 vs $ 140 per thousand cubic meters). After all, when you purchase gas in the European Union, Ukraine has to pay for its transit through its territory and the territory of neighboring countries, as well as the reverse. Thus, the Ukrainian authorities have denied repeated allegations that to buy gas in Europe is cheaper than in Russia.

As Ukraine makes Russian gas evropeiskaja Kiev does not exclude the possibility of returning to purchases of gas in Russia. In June “Gazprom” has reported about the request of “Naftogaz” to resume supplies, but then failed to agree on price formula. In early September, this subject was again raised Alexander Novak, saying that Ukraine could eliminate the risks of restrictions on their users and disrupting the transit of gas to Europe in case of purchase of gas from “Gazprom” in the amount of 2-3 billion cubic meters. Finally, about the readiness to buy gas from Russia, said Chairman of the Board of “Naftogaz of Ukraine” Andrey Kobelev – just in connection with plans to increase stocks for the winter. “Our proposal applies to all companies, including “Gazprom”, if he is willing to offer a reasonable price and stick to rules,” he said.

However, in addition to pricing issues, “Gazprom” and “Naftogaz” will have to deal with paying for gas supplied in the DNI and LC starting from February 2015, when the Ukrainian company refused to provide the Donbass. The evaluation of Miller, we are talking about the amount of more than 718 million dollars, to be paid “Naftogaz”. The latter refused to recognize this debt, but a few days ago Nasaliki declared that intends to discuss the issue with Novak in Minsk on September 21. Another agenda item of this meeting will be the duty of Donbass for electricity. Last week the acting Director of Ukrenergo Vsevolod Kovalchuk said at a press conference in Kiev, which from the beginning of the conflict, its size reached 24 billion hryvnias, or about $ 900 million.

Independence day after tomorrow

Interestingly, but even in the mode of Abraham in connection with the upcoming heating season in Kiev continues to use the rhetoric of energy independence. The other day during a visit to shebelinske field in the Kharkiv region, Prime Minister Vladimir Groisman said that Ukraine will be able to stop importing gas by 2020. To do this, in the next five years to increase its own production of 7 billion cubic meters, and only this year the Ukrainian government has issued 14 permits for exploration, although for the last seven years such documents are not issued at all.

Gas production in Ukraine has actually been rising for eight months of this year it increased by almost 4% compared to the same period last year (up to 13.4 billion cubic meters). At the same time, gas consumption in the country falls. Last year, it decreased by 20.6% (to 33.7 billion cubic meters) in January-August this year – another 17.6% to 18.7 billion cubic meters). This contributes not only to higher prices and the decline in industrial production, but also a massive shift of consumers to other energy sources – both traditional and alternative. For example, “Ukrteploenergo” the beginning of the replacement of gas with coal in Darnitsa thermal power plant, Sumy and Chernihiv CHP and Bioenergy Association of Ukraine has counted more than 4 thousand coppers on the wood, over 100 boilers on straw and about 70 boilers on sunflower husk. In total, according to estimates of the Association, at the expense of energy from biomass in Ukraine can replace about 20 billion cubic meters of gas.

However, all this is is just the perspective of the distant future, but in the current heating season Ukraine has to seek additional money not only on gas but also on coal. Before 1 November in the framework of the plan on preparation for winter in the warehouses of thermal power plants and CHP need to save 2.8 million tonnes of coal, although at the beginning of September its reserves, according to “Ukrenergo” amounted to 950 thousand tons. At a press conference on 8 September, the head of Ukrenergo Vsevolod Kovalchuk did not rule out that in case of lack of coal will have to buy electricity again from Russia. Otherwise Ukraine faces a winter, “worst case scenario” – disabling 5-7 megawatts of power.

A significant portion of the coal will be purchased abroad in connection with the conflict in the Donbass, which has deprived the Ukrainian energy sector access to the products of local mines (production in the region continues only holding DTEK Rinat Akhmetov). Last year the volume of coal imports amounted to 1,632 billion dollars and over eight months of this year, according to the State fiscal service, Ukraine imported coal for $ 900 million, mostly from Russia (nearly 595 million dollars), in second place – the USA (about 133 million dollars).

Of course, the purchase of coal abroad also involves the additional burden on the Ukrainian budget. Moreover, the country’s leadership intends to make every effort to Ukraine via Russia did not get coal from the Donbass, and this will require substantial investment in re-equipment of Ukrainian power plants for the transition with the Donbass anthracite coal to gas coal. In particular, as reported in late August nasalik, the replacement of one of the largest in Ukraine, zmiivska TPP (Kharkiv region) will cost 175 million (420 million rubles). The head of the Ukrainian Ministry of energy confirmed that the government plans to allocate funds for the purchase of coal abroad. While the Ukrainian authorities had to take such an unpopular measure as the introduction of the exchange of price formation for coal of its own production. This decision of the Ukrainian commentators immediately saw the lobbying interests of Akhmetov, may lead to another increase in electricity tariffs.

But without the machinations Akhmetov tariffs for housing and communal services in Ukraine continue to grow. At the end of April was set a single price for gas for the population size 6879 hryvnia per thousand cubic meters, corresponding, according to the Ukrainian government, 100% market level. As of 1 September by 25-30% have been increased the retail electricity tariffs is to 71.4 Ukrainian kopecks per kWh if consumption up to 100 kWh per month and to 1.29 UAH per kWh at higher consumption levels. Thus after six months, the population is waiting for a new tariff increase to 90 cents and 1.68 UAH per kilowatt, respectively.


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