Ukrainian companies to test gas exports to central Europe

LONDON (ICIS)–Ukrainian gas companies are preparing to test exports to central Europe after the country has more than halved entry-exit tariffs for this year, a source close to discussions told ICIS.

Several companies will be looking to export volume to Hungary and Slovakia to test the readiness of the transmission system operator Ukrtransgaz and the customs regimes to new types of operations.

The Ukrainian grid operator Ukrtransgaz is also in talks with its Polish counterpart GAZ-SYSTEM to allow backhaul flows on the Hermanowicze interconnector and Ukrainian gas companies could equally export to Romania if the country’s grid operator Transgaz agreed to create a new interconnection point.

Furthermore, UTG is looking to introduce short-haul services for European companies looking to inject gas in Ukraine’s storage facilities, taking advantage of the country’s 31 billion cubic metre (bcm) storage capacity as well as cheaper transport tariffs from the border to the storage sites and back.

If successful, the move would help Ukraine to diversify its regional role, being not only the main transport route for Russian gas to Europe and an importer of volumes from European countries, but also an exporter in its own right.

At the end of last year, the Ukranian regulator NERC more than halved entry-exit tariffs in a bid to help the country boost the country’s attraction as an exporter and transit route.

Entry tariffs were reduced from $12.47/thousand cubic metres (kcm) to $6.04/kcm from 1 January 2019 for a period of one year. The regulator calculated the new tariffs based on the ICIS historical German NCG data. Exit tariffs vary, but they have also been halved compared to existing values.

The move is expected to create more liquidity in central Europe as well as Ukraine where trading activity picked up in the last year.

Turnover on the Ukrainian virtual trading point (UAVTP) in 2018 amounted to 44.4bcm, 18% higher year on year, according to latest UTG data. The number of traders active on UAVTP also increased by 10% year on year to 367.

The traded volume included mainly bilateral deals, as well as trades concluded on the energy exchange UEEX.

“Liquidity and churn rate are growing, which is a good indicator of the development of the gas market in Ukraine,” a UTG source said.