Ukraine offers traders capacity at its border with Russia
Ukraine is making gas transit capacity available at its border with Russia for traders to help bring more gas into Europe. In a LinkedIn post June 24, the CEO of the national operator GTSOU Sergei Makogon said that the system was operating at 30% capacity and pointed out that Gazprom has not been using the interruptible capacity this year.
European hub gas prices are at 13-year highs as strong demand from Asia has pulled LNG away from Europe at the time when it is needed for refilling storage. The amount of gas in store is very low, exposing Europe to the threat of extreme prices if next winter is anything like a repeat of the last.
Next month, even less gas will flow as Nord Stream 1 is on maintenance. That will keep about 1.6bn m³/yr that would have flowed to Germany off the market, he said.
Makogon said that title transfer from Gazprom to third parties can be arranged at Gazprom's electronic sales platform, which "is already heavily used by Gazprom for spot trading."
"If Gazprom chooses again not to book additional capacities via Ukraine for any reason, be they technical or political, European traders can and should take advantage of Ukraine's liberalised market and off-take gas at the Ukrainian-Russian border. There are no obstacles and no issues on Ukraine's side for shippers to book transit capacities through Ukraine," he wrote.
"If Gazprom is unwilling to book transit capacities through Ukraine, it is imperative that European traders are given an opportunity to purchase gas at the Ukrainian-Russian border. If this test fails yet again, this will be a clear sign for Europe of what it should expect in the future," he said.
He did not mention all the background to the supply situation, including the failure to complete Nord Stream 2 on time. Scheduled to be operational a few years ago, it is now complete and awaiting commissioning. A long-delayed permitting decision in Denmark and sanctions on Nord Stream 2 – decisions in which Ukraine and Poland played an advocacy role – have slowed it down. With the exception of last October, Gazprom has not bought additional capacity in Ukraine to supplement its agreed monthly volume.
As a commercial entity, it has not replied to NGW's requests for an explanation of its behaviour but Gazprom is not contractually obliged to meet European gas demand shortfalls and it might be holding out for even higher prices later this year, going for value over volume. Russia too needs to replenish its storage and Gazprom as a state controlled company, has social obligations at home.
With output from the Dutch swing producer, the Groningen field, much reduced and Norway undertaking a major maintenance programme and with less production flexibility this year, Algeria is stepping up exports to Spain and Italy, according to consultancy Poten. In a webinar June 23, it said that Italian hub prices were a lot higher than both spot and oil-indexed prices in Italy, explaining the relatively high level of storage refilling in Italy.
Eni and Algeria's Sonatrach also revised their gas sales and supply contract earlier this month to enable more short-term trade which will take effect in the coming gas year, although on the negative side, the country's smaller LNG terminal at Skikda has been out of action since an accident June 11.