Ukraine’s Naftogaz sees no reason for current European gas imports: CEO

Ukraine’s state-owned Naftogaz Ukrayiny does not see the sense for it to import gas from Europe in the coming months given the high level of gas storage stocks in the country, its CEO Andriy Kobolyev said late Monday.

Ukraine currently has some 16.2 Bcm of gas in storage, having finished the end of the heating season earlier this month with 10-year high stocks.

Storages had been injected with more than 21 Bcm ahead of the winter season in October last year, but stocks were not drawn down as expected due to a very mild winter and the conclusion of a new transit deal with Russia in December.

“For Naftogaz, we don’t see any sense in importing now because the market is filled to overflowing,” Kobolyev said in an interview with Ukrainian television.

Other private companies continue to import gas from Europe, however, with flows from Slovakia currently at around 15 million cu m/d, according to data from S&P Global Platts Analytics.

Kobolyev said that if Naftogaz were to import gas it would be for immediate resale on the Ukrainian market, rather than for storage.

Ukraine usually targets summer gas injections into storage to enable it to have stocks of around 18-19 Bcm ahead of the following winter season.

Kobolyev said domestic gas production — both by Naftogaz and its subsidiaries, and by other companies in Ukraine — would be sufficient to meet storage demand.
Reduced injections

Earlier this month, the head of Ukraine’s state-owned grid operator GTSOU said the country would add just 2-3 Bcm of gas to its storage facilities ahead of the high-demand winter season.

Serhiy Makohon said it represented the smallest amount of gas to be injected in more than 10 years.

Ukraine officially ended district heating in most regions on April 5, or 10 days ahead of schedule, due to warm weather and the subsequent weaker demand for gas.

Ukraine’s six-month high-demand season usually begins on October 15 and ends on April 15.

Naftogaz is traditionally the primary entity in charge of injecting gas ahead of the high-demand season.

But due to unbundling enacted on January 1, GTSOU was appointed as the independent operator of gas transportation system, with Naftogaz now mostly focusing on gas production and trading.

Makohon said there was no longer any legal requirement for market participants to create gas reserves for the winter.

Ukraine, whose gas storage facilities are mostly near the border with the EU, is capable of storing up to 31 Bcm of gas.
Private traders

Given the large level of spare capacity, Ukraine has been increasingly marketing its services to private gas traders over the past two years.

A number of regulations enacted last year allow traders to keep gas for up to three years without customs clearance, and to use it in other European markets without actually paying taxes and duties in Ukraine.

Ukraine offers up to 12 Bcm of storage to private traders.

The private traders from the US, France, Germany, Switzerland, Poland, Ireland and other EU countries held 1.6 Bcm of gas in the Ukrainian storage facilities in March, up from 1.4 Bcm in August 2019 and 515 million cu m in June 2019, according to GTSOU.

Ukraine’s spare capacity could be used more over the coming summer season as a tool to help balance the European market, which is expected to remain significantly oversupplied.
Source: Platts