FT Interview with
Hryhoriy Nemyria
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EU Warns of Potential Gas Crisis
23 June 2009
Published in
Inform
issue #116
See the full issue here.
The European Commission President José Manuel Barroso has warned EU states to brace themselves for another gas supply crisis if Ukraine is unable to finance the purchase of sufficient natural gas from Russia’s state-run gas firm, Gazprom, to replenish its underground stores.
Mr Barroso’s warning followed Prime Minister Yulia Tymoshenko’s meeting last week in Kyiv with Frank-Walter Steinmeier, the Minister of Foreign Affairs for Germany and his Polish counterpart Radoslaw Sikorski. Top of their agenda was how the EU may be able to assist Ukraine to maintain necessary levels of gas in its underground storage facilities in Western Ukraine. This is vital as Ukraine is looking to raise around $4 billion to purchase gas for storage, so as to avoid any supply disruption to EU countries in the winter months.
The day before the meeting with the foreign ministers, Alexander Ananenkov, Deputy Chief Executive of Gazprom, told reporters, "Ukraine isn’t pumping gas into its gas storage facilities in due amounts.”
See the full issue here.
The European Commission President José Manuel Barroso has warned EU states to brace themselves for another gas supply crisis if Ukraine is unable to finance the purchase of sufficient natural gas from Russia’s state-run gas firm, Gazprom, to replenish its underground stores.
Mr Barroso’s warning followed Prime Minister Yulia Tymoshenko’s meeting last week in Kyiv with Frank-Walter Steinmeier, the Minister of Foreign Affairs for Germany and his Polish counterpart Radoslaw Sikorski. Top of their agenda was how the EU may be able to assist Ukraine to maintain necessary levels of gas in its underground storage facilities in Western Ukraine. This is vital as Ukraine is looking to raise around $4 billion to purchase gas for storage, so as to avoid any supply disruption to EU countries in the winter months.
The day before the meeting with the foreign ministers, Alexander Ananenkov, Deputy Chief Executive of Gazprom, told reporters, "Ukraine isn’t pumping gas into its gas storage facilities in due amounts.”
Ukraine’s storage facilities have a capacity of
around 32 billion cubic metres of natural gas.
Historically, they have been filled in the summer
months ahead of the high peak demand from EU
countries in the winter. Some 80 percent of
Gazprom’s natural gas to Europe transits via
Ukraine’s gas transportation system, which is the
second largest in Europe. But officials from
Naftohaz Ukrainy – Ukraine’s national gas company –
say it has 16 billion cubic metres of gas left to
pump this year in addition to monthly gas purchases
used mostly for industrial needs.
The demand for gas in the country has slumped as a consequence of higher gas prices and the recession, both of which have hit Ukraine’s manufacturing industry hard.
Anxious to avoid any repetition of the gas shut-off in January that caused a number of European countries to shiver, the EU has been keen to explore scenarios in which it could assist Ukraine. One proposal is that European energy companies effectively pay Gazprom and Naftohaz to purchase gas and store it in the underground facilities. The companies could then sell the gas on spot markets in the winter to recoup their investment.
Oleksandr Paliy, a political analyst, was quoted in the Financial Times as saying, “It doesn’t make sense for Ukraine to pump gas into its storage tanks which is not necessary for the economy. It makes sense however to pump it for those who need the storage, namely the Europeans.”
Another option being explored is a $4 billion loan facility from European banks which would enable Ukraine to purchase three months of gas from Russia. It is understood that Ukraine, the EU and Russia are working jointly on this option after Russia refused to make a loan on its own.
On Friday, Mr Barroso warned that Europe must not sleepwalk into another gas crisis. “We have also advised vulnerable member states to take immediate measures to respond to a possible crisis," he said.
Deputy Prime Minister Hryhoriy Nemyria commented, “This is an important issue not just for Ukraine or Russia, but for Europe. And it is precisely because we are committed to being a reliable, stable energy partner, that we are so anxious to find a resolution that will benefit all. It is a European problem and it needs a European solution, involving Ukraine, Russia and the EU."
Funding looks tight going forward. This month, the National Bank of Ukraine printed and converted UAH 3.8 billion to $500 million. The move helped Naftohaz to settle its $650 million May gas bill.
Meanwhile, Prime Minister Yulia Tymoshenko has proposed boosting the capital of Naftohaz to limit gas price increases to domestic consumers and to strengthen the company. Such a move may be necessary as Ukrainian consumers buy gas at subsidised levels, well below the cost Naftohaz purchases it from Gazprom. Restructuring Naftohaz’s finances is also a stipulation of the loan conditions imposed by the International Monetary Fund.
The demand for gas in the country has slumped as a consequence of higher gas prices and the recession, both of which have hit Ukraine’s manufacturing industry hard.
Anxious to avoid any repetition of the gas shut-off in January that caused a number of European countries to shiver, the EU has been keen to explore scenarios in which it could assist Ukraine. One proposal is that European energy companies effectively pay Gazprom and Naftohaz to purchase gas and store it in the underground facilities. The companies could then sell the gas on spot markets in the winter to recoup their investment.
Oleksandr Paliy, a political analyst, was quoted in the Financial Times as saying, “It doesn’t make sense for Ukraine to pump gas into its storage tanks which is not necessary for the economy. It makes sense however to pump it for those who need the storage, namely the Europeans.”
Another option being explored is a $4 billion loan facility from European banks which would enable Ukraine to purchase three months of gas from Russia. It is understood that Ukraine, the EU and Russia are working jointly on this option after Russia refused to make a loan on its own.
On Friday, Mr Barroso warned that Europe must not sleepwalk into another gas crisis. “We have also advised vulnerable member states to take immediate measures to respond to a possible crisis," he said.
Deputy Prime Minister Hryhoriy Nemyria commented, “This is an important issue not just for Ukraine or Russia, but for Europe. And it is precisely because we are committed to being a reliable, stable energy partner, that we are so anxious to find a resolution that will benefit all. It is a European problem and it needs a European solution, involving Ukraine, Russia and the EU."
Funding looks tight going forward. This month, the National Bank of Ukraine printed and converted UAH 3.8 billion to $500 million. The move helped Naftohaz to settle its $650 million May gas bill.
Meanwhile, Prime Minister Yulia Tymoshenko has proposed boosting the capital of Naftohaz to limit gas price increases to domestic consumers and to strengthen the company. Such a move may be necessary as Ukrainian consumers buy gas at subsidised levels, well below the cost Naftohaz purchases it from Gazprom. Restructuring Naftohaz’s finances is also a stipulation of the loan conditions imposed by the International Monetary Fund.