Ukraine in ‘gas import rush’

Brent crude oil05 March 2014, News Wires – Ukraine has drastically increased gas imports from Russia in recent days due to fears of a price hike by Gazprom amid a Russian military build-up against Kiev that has triggered a stand-off with the West, according to reports.

The Russian state-owned gas giant warned on Monday that it may increase the gas price for Ukraine after the first quarter, though it has not threatened any cut-off of supplies as part of Moscow’s response to the recent ousting of Russia-friendly president Viktor Yanukovich.

“The situation with payments is worrying. Ukraine is paying but not as well as we would like it to… We are still thinking about whether to extend the pricing contract into the next quarter based on current prices,” Gazprom’s chief financial officer Andrei Kruglov was quoted as saying by Reuters.

He also said that Russian gas transit to Europe via Ukraine was currently running normally, amid fears that supplies to the continent could be disrupted by the ongoing crisis.

Russian supplies about a quarter of Europe’s gas demand, with current daily flows of 270 million cubic metres worth almost $100 million a day, and about a third of this is exported via Ukraine.

Moscow has in the past cut gas supplies to Ukraine when negotiating prices with Kiev, causing shortages in central Europe.

Concerns over gas supplies to Ukraine have risen after Russia’s President Vladimir Putin gained parliamentary approval at the weekend to invade the country, claiming the right to defend Russian interests.

Russian troops were reported by the BBC to have effectively gained control of Ukraine’s Crimea peninsula on Monday, having surrounded two large Ukrainian military bases, occupied airports and taken over a ferry terminal, after unidentified gunmen seized key government buildings late last week in the pro-Russian region.

There have been movements of Russian warships in the Black Sea, with the Crimean port of Sevastopol the base of Russia’s regional Navy, and the naval headquarters has been blockaded.

There has also been a reported build-up of Russian military armour on the Russian side of the Kerch Strait that separates the peninsula from Russia, possibly in preparation for a full-scale invasion.

Russia is also reported to have 150,000 troops stationed along Russia’s land border with eastern Ukraine where pro-Russian protests, believed to have been orchestrated by Moscow, have taken place over the last few days.

Moscow has refused to recognise Kiev’s newly installed interim government that favours stronger ties with the European Union and has warned that Ukraine may lose a discount to the gas price it now pays to Gazprom due to the country’s outstanding gas debt.

Ukraine’s gas transit monopoly Ukrtransgas said the country has boosted Russian gas imports over the last few days, with analysts saying Kiev was trying to import as much as possible at the lower prices.

Ukrtransgas spokesman Maxim Belyavsky told Reuters Ukraine had more than doubled its gas imports from Russia to 45 million cubic metres on 1 March, compared with 20 MMcm a year ago.

Russian gas industry sources said Ukrainian state energy company Naftogaz had imported 27.6 MMcm on 26 February, 45.8 MMcm on 27 February, 60 MMcm on 28 February and 44.5 MMcm on 1 March.

Sabre-rattling by Russia has provoked a strong reaction from Western powers, with the G7 major industrialised nations condemning the military build-up.

US Secretary of State John Kerry condemned Moscow for what he called “an incredible act of aggression” and said there would be “very serious repercussions”, with Washington threatening to isolate Russia economically and boycott the upcoming Russia-hosted G8 summit in Sochi.

The crisis has already hit the Russian stock market and sunk the value of the rouble against the dollar to an all-time low, while also triggering sales of Russian assets.

Meanwhile, a delegation from the International Monetary Fund was due to arrive in Kiev on Monday to discuss Ukraine’s financing needs.

The country is reported to need about $35 billion in financial assistance over the next two years to avoid bankruptcy after interim Prime Minister Arseny Yatseniuk said money transfers coinciding with Yanukovich’s exit had drained state coffers.

 

– Upstream

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