Ukraine Heads Towards Gas Supply Diversification

Reverse use of existing gas pipelines and trans-Caspian project have been identified as Ukraine’s major ways to diversify sources of gas supply.

Currently, Ukraine imports up to 70 percent of natural gas from Russia at a price exceeding USD 500 per thousand cubic meters. Minister of Economic Development and Trade Petro Poroshenko believes that diversification of gas supply would increase energy security of Ukraine.

Ukraine considers the option of the reverse use of GTS, allowing it to import gas not only from Russia, but from the European Union as well. Naftogaz, reportedly, plans to sign a short-term contract with the German company RWE for the supply of spot gas purchased in Europe via Slovakian pipelines.

Recently, official Kyiv informed about its intention to invest up to EUR 790 million into the trans-Caspian gas pipeline project. This would allow Ukraine to transport liquefied natural gas from the Georgian oil port of Kulevi on the Black Sea by tankers to south Ukrainian LNG Terminal Yuzhny. The trans-Caspian gas pipeline is supposed to go through the territory of Azerbaijan and Georgia, bypassing Russia.

Minister Poroshenko said that diversification of natural gas supply would make Ukraine’s position stronger while negotiating with Russia. The daily spot price for natural gas fluctuates between USD 250 and USD 350 per one thousand cubic meters, he said. Ukraine, on the other hand, is being charged USD 516 per thousand cubic meters for Russian gas. Since 2010 Kyiv has been receiving a USD 100 discount for letting the Russian Black Sea Fleet stay in Crimea. This, however, does not prevent the country from having to pay almost 27 percent of its estimated budget income in 2012 for the Russian gas.

According to the experts, Ukrainian GTS remains an important part of the European energy supply system. Until recently, Russia has been transferring up to 80 percent of its gas to the European consumers through Ukraine. Just a few weeks ago Gazprom requested Ukraine to increased its daily transit capacity of Russian gas to the EU by 17.3 million cubic meters or about 7 percent, reported the Ukrainian state gas pipelines and gas depots operator – Ukrtransgas. The request was associated with temporary repairs at the Russian North Stream gas pipeline.

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LNG World News Staff, April 26, 2012;