Stable operation of Ukraine’s GTS under threat starting June 24, operator warns

Operations of Ukraine's gas transmission system may be under threat after June 24 due to a shortage of funds at Ukrtransgaz, the company said in a statement.

"Due to the shortage of funds, Ukrtransgaz has no opportunity to pay on time on contracts for the purchase of gas for own process purposes (PP gas)," the statement says.

It is noted that the company's debt over March-April to the suppliers of fuel gas amounts to UAH 4.1 billion (US$154.9 million). As a result, some suppliers refuse to further transfer gas volumes determined by existing contracts.

"The remaining volumes of PP gas, which were purchased under preliminary agreements, are enough to ensure the operation of the gas transmission system only until June 24," the state-owned company emphasized.

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The GTS operator has already appealed to the State Emergency Service of Ukraine with the corresponding issue.

Ukrtransgaz is negotiating with the energy regulator to immediately fix the situation. The company initiated negotiations with creditors, including NJSC Naftogaz of Ukraine, on debt restructuring.

The National Security and Defense Council of Ukraine has been briefed on the situation.

Ukrtransgaz claims that the critical financial condition of the GTS Operator is caused by a number of factors, of which the management informed the Regulator throughout 2018 and 2019.

"First of all, the financial situation of Ukrtransgaz is worsening with each month over the economically unjustified temporary tariffs for the GTS Operator, which were adopted by the regulator at the end of 2018. In particular, they allow timely payments for the purchase of PP gas in the amount of no more than 60% of the required annual level," the statement says. "Secondly, the problem of unauthorized gas extraction from the gas transmission system has not been resolved yet, enabling market participants from 2016 to February 2019 to accumulate more than UAH 35 billion in debt to Ukrtransgaz for balancing services, of which 91% are regional gas distribution companies' debts. After the transition of the gas market of Ukraine to daily balancing from March 1, 2019, the situation has not changed significantly: distribution operators continue to illegally pump gas from the GTS, including for their own PN, without paying for it. Over the period March-April 2019, the debt of the gas distribution system operators increased by another UAH 2.5 billion," Ukrtransgaz stressed.