European gas storage emptied a record pace. Records for gas supplies to the EU establishes and Gazprom. Ukraine, like other countries, is also dramatically increased its use of natural gas – and it traditionally raises the issue of security of Russian gas transit to Europe.
The level of gas reserves in underground storage facilities in Europe as a whole fell below half. At the end of the gas day on 22 January, the occupancy rate in subways is 48,92%, according to the platform’s Gas Infrastructure Europe (GIE).
“All of these trends can provide Russia yet another record year for gas demand from Europe”
The percentage value on that date this is one of the lowest in the current decade. In absolute value (49.5 bcm of active gas) the volume of minimum reserves in underground storage facilities over the past three years, reports “Interfax”. In Germany (on the main the European gas market) the inventory level also corresponds to the General trend – 48, 97mm% 11,274 billion cubic meters of active gas.
This is due to the growth in gas demand amid colder weather and competitive advantages of gas compared to other fuels, explains the newspaper VIEW Deputy Director of the national energy security Fund Alexei Grivach.
In other words, due to the fact that gas is now cheap, in Europe became more heated gas to produce with it, electricity and use gas for other industrial purposes.
For Gazprom are things working out for the best. For 10 consecutive days (from 9 to 19 January) Gazprom supplied the maximum amount of gas through the pipeline “Nord stream” is 167.4 million cubic meters per day. Overall, Gazprom’s exports to Europe for several weeks is at record levels – more than 600 million cubic meters per day.
Enhanced flow of gas from storage facilities enhances not only the importance of gas supplies to the European market. Quickly dwindling European UGS can provide high rates of gas demand also this spring and summer, when there is a purchase of fuel to restore volumes in storage.
All of this is supporting prices on Friday on the site of the British NBP price has soared to 244 dollars per thousand cubic meters (against the background of growing problems in the main repository of the country’s Rough), in European hubs prices went up to $ 226-230. The price of January contracts of Gazprom, according to the FAS, is less than $ 200 per thousand cubic meters. The profitability of Russian gas is clear.
Thus, all these trends can provide Russia yet another record year for demand for gas from Europe. “If the weather trends continue, the whole year can be very good for Gazprom”, – said Grivach of the NESF. Last year, the Russian supplier has already achieved unprecedented historic result: the share of Gazprom in the balance of foreign countries that receive Russian gas in 2016 reached 33.5% after 31% by the end of 2015.
On the other hand, it creates even higher risks for transit of Russian gas through Ukraine. “If the second half of the heating season, there are heavy frosts, it can create serious problems with gas supply to Europe. Because the Ukrainian UGS with the current inventory levels and current capabilities for the daily selection will not be able to cover the likely growth in consumption. Ukraine will have to seek other sources of gas supply, to buy it from Gazprom or not to satisfy the demands of European consumers,” – says Grivach.
Just recently, the head of Gazprom Alexey Miller once again drew attention to the situation in Ukraine. Gas reserves in Ukrainian underground storage facilities to 19 January was only 10,873 billion cubic meters and the daily selection of UGS from January 15, 2017, increased by more than 40%. This raises concerns as to the normal passage of the country’s winter peak period consumption.
Only in the case that the selection of gas from Ukrainian underground storage facilities will not exceed 50 million cubic meters per day by the end of the heating season, storage will be 8 billion cubic meters of gas, which are necessary to ensure the operation of the transmission system. However, during the severe cold snap in early January, the selection of gas from underground storage facilities reached 100 million cubic meters per day. While winter is not yet over, and there is traditionally the coldest Feb.
Ukraine needs an additional 1.5–4 billion cubic meters a year to avoid a winter crisis. But Kiev is ready to buy fuel only on their own terms – price, which suits the Naftogaz, and the signing of the additional agreement to the existing contract.
Important point of debate between Gazprom and Ukraine is the principle of “take or pay”. Kiev wants to have this spelled out in the basic contract principle has been eliminated with the new procurement by the additional agreement. But Moscow rightly believes that no additional agreement is not needed.
First, the contract price for Naftogaz, and so it appears lower than Kiev pays for gas reverse from Europe. Which is already below that? Second, the principle of “take or pay” spelled out in the contract, and it must perform. To give in on this issue now, especially not in the interests of the Russian Federation, as there is a lawsuit. Gazprom filed a lawsuit in the international arbitration with the requirement to collect billions of dollars in fines on Naftogaz violation of this principle in previous years.
Russia is ready to discuss only the volume and timing of deliveries. But not the revision of the contract or the signing of an additional agreement. The point in these disputes should be put by the court.
However, Ukraine impracticable conditions creates risks for gas transit and keeps at Bay the whole of Europe. Gazprom fears that Kiev could start stealing Russian gas. Moreover, Kyiv is likely to beat this theft as the implementation of the decision of the Kiev court for antitrust case against Gazprom. According to the decision of this court, the Ukrainian side has the right of enforcement of the Gazprom penalty.
Therefore, earlier, the Russian company has already warned Brussels that if Ukraine starts siphoning off gas, Gazprom will be forced to stop the transit of gas to Europe.