Gazprom to lose $3 billion if Ukraine reaches deal with Slovakia

Gas pipeline
Source: DollarPhotoClub

Russian Gazprom may lose up to $3 billion if Ukraine reaches agreement with Slovakia on the reverse flow of natural gas, Polish daily Rzeczpospolita reports.

Slovakia is crucial when it comes to supplying Ukraine with the EU gas. Kiev is able to annually receive up to 30 billion m3 of EU gas, which is more than the amount it last bought from Gazprom. Therefore, the Ukrainian authorities are asking Brussels to support efforts to organize a large supply of gas from Slovakia.

Kiev argues that the situation where the reverse flow from Slovakia is decided on by Gazprom is in breach of the Third Energy Package – adopted in 2009 to enhance cross border trade and access to diversified sources of energy. On the other hand, Gazprom doubts the legality of reverse flow gas into Ukraine, since under the contract countries cannot redistribute Russian gas. For now, Naftogaz signed a memorandum with the Slovak Eustream for the supply of 8 billion m3 per year.

“We have signed a memorandum which stipulates that the maximum amount of small reverse supplies stands at 22 million cubic meters daily. There is another option, large reverse supplies, which may provide us with up to 30 billion cubic meters of gas annually,” Yuri Prodan said during a meeting with EU Energy Commissioner Gunther Oettinger in Brussels.

Currently, Ukraine has enough gas in underground storage to last the country a full year, without any additional imports. What is more, Gazprom must now pay more for transiting gas through Ukraine, since the Ukrainians upped the price.

Meanwhile, European gas prices have fallen to $260/1000 m3. As a result, Ukraine could get the reverse flow gas for about $300 which is considerably less than the Gazprom’s already discounted offer of $385.

Rzeczpospolita quotes Uralsib bank analysts who calculated that if Ukraine reaches an agreement with Slovakia to activate a ‘great reverse’ (30 billion m3 per annum) Gazprom will lose approximately $3 billion before the end of 2016.

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