Ukraine aims to store record gas, payment unclear

15:32, 19 May 2009
Ukraine
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Ukraine aims to store 28 bcm by end `09

Ukraine hopes to have a record 28 billion cubic metres (bcm) of gas in storage by this winter, the energy ministry said on Tuesday, but President Viktor Yushchenko slammed a proposal on how to pay for the extra gas, Reuters reported.

Ukraine`s reserves of about 17 billion cubic metres last winter helped it survive a three-week gas cut-off by Russia during a row over gas prices and debts. A gas trade intermediary, RosUkrEnergo, also held 11 bcm in Ukraine.

It was still unclear how Ukraine would pay for the extra gas. Yushchenko, long critical of a supply deal signed with Russia after the January standoff, said he would oppose any notion of using transit fees paid by Russia for gas purchases.

"As a result of planned supplies of 12.27 bcm of gas into underground storage, the volumes (of reserves) on Oct. 15 will be about 28 billion cubic metres," the ministry said in official documents seen by Reuters.

The documents say Ukraine already has 16 bcm in storage and another 12 bcm would have to be bought. Tymoshenko said last week 1 bcm of gas bought in April went towards reserves.

State energy firm Naftogaz said last Friday it aimed to start buying gas for storage by using advance payments received from Russia`s Gazprom (GAZP.MM) for the use of Ukraine`s pipelines to pump gas to Europe. [ID:nLF503157]

"If such a decision is taken, then I will stop it, and get experts in the Constitutional Court to examine it," Yushchenko told the daily Delo.

"Moving towards advance payments for services would be the first symptom of a lack of balance in Naftogaz (finances)."

The Russian gas supply deal stipulates Ukraine must buy 40 billion cubic metres of gas this year but sets no volume of gas Russia will transit to Europe.

ENERGY CONSUMPTION DIPS

Energy consumption has been slashed around Europe due to the economic slowdown, making it difficult to predict the amount of transit fees Russia must pay. That in turn could force Naftogaz to make a rebate of fees paid in advance.

Russian transit fees go to Ukrtransgaz, the Ukrainian pipeline operator which is a unit of Naftogaz. The government has had to regularly support Naftogaz`s finances since Russia began raising gas prices steeply in 2005.

Naftogaz expects a budget deficit of $4.5 billion by the end of this year because of the gas it wants to buy for storage.

Yushchenko again denounced the Russian supply deal, signed by his estranged ally Prime Minister Yulia Tymoshenko and Russian Prime Minister Vladimir Putin.

He has said before the price agreed was too high and criticised an undertaking to buy a fixed amount of gas as consumption is falling, while Russia made no such commitment on transit.

"I have no doubt the two sides will come to review these documents. Because it is impossible to live with such an agreement," Yushchenko told the paper.

Putin said Russia would impose no fines for Ukraine`s lower consumption of gas after meeting Tymoshenko last month.

Ukraine is paying $270.95 per 1,000 cubic metres of gas in the second quarter, lower than the $360 it paid in the first quarter, but still higher than last year`s price of $179.50.

Russia pays Ukraine $1.70 per 1,000 cubic metres of gas transported across 100 km.

Reuters

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