Ukrainian independent firms start importing EU gas

Several Ukrainian independent traders are importing gas into Ukraine from Slovakia, Poland and Hungary, the Association of Gas Traders of Ukraine told ICIS on Thursday.

The companies include Energy Resources of Ukraine, and Ukraine Energy that import gas for resale in Ukraine. Other companies, such as steel giant ArcellorMittal and energy company DTEK, import gas for their own needs. ERU Trading, an affiliate of Energy Resources of Ukraine, imported 21 million cubic metres (mcm) of gas from Slovakia in September and plans to import 120mcm/month (see ESGM 14 October 2015).

Ukraine Energy plans to import 6mcm of gas into Ukraine from Slovakia in October after having imported 1.2mcm in September, company owner Igor Liski told the First Ukrainian Gas Forum in Kiev on Wednesday.

The company started importing gas bought on the Slovak hub in April as fuel for its Zhytomyr Cardboard Factory, but later began reselling it on the Ukrainian market, Liski told ICIS at the forum. The factory has now switched to alternative types of fuel, but plans to continue importing gas for resale as a trader. The company plans to import 100mcm in 2016.

Liski told ICIS that his company has booked 6mcm/month of cross-border capacity from Slovakia at Budince until the end of the year.

According to Liski, Ukraine Energy was able to resell the imported gas a little bit below the price offered by Ukraine’s incumbent Naftogaz and make a profit. He expected this arbitrage opportunity to last over the coming months.

ICIS also understands that several international companies are either involved or looking into importing gas into Ukraine, including German utility RWE, US energy company TrailStone, French ENGIE and Swiss Axpo.

Reserve stock

There are concerns among market participants and observers that the activity of the independent suppliers may be halted due to a new requirement for companies willing to import gas to Ukraine to hold a certain volume of natural gas in storage. The Association of Gas Traders of Ukraine called the requirement “discriminatory”.

The relevant law was expected to come into effect this month, but its implementation was postponed earlier this week until 1 January 2016. The law allows only those suppliers who have enough reserve stock to take part in the market. The companies must have in reserve the equivalent to 100% of the gas volume they have agreed to supply consumers with for a month.

“[The] injection of natural gas is carried on the most loyal financial terms for Naftogaz, also through lending under government guarantees; private suppliers are not able to use these conditions and do not have special responsibilities concerning the need for pumping gas into underground storage facilities,” the association said.

Oleksiy Nekrasa, head of the Association of Gas Market Participants of Ukraine, agreed that it was only Naftogaz that had enough gas in stock to comply with the law. “The law creates additional financial responsibilities for suppliers, which in the current financial situation in Ukraine cannot be met,” he said. “In order for a company to be able to have reserve stock it needs to freeze a certain amount of money for an indefinite time.”

He added, however, that another purpose of the law was to eliminate fly-by-night companies that may offer the best prices but may not be able to deliver gas eventually.

“The law is beneficial because there will be gas in storage,” agreed Roman Vecherik, head of storage division within Ukrainian grid operator Ukrtransgaz.

“Of course now gas is expensive and it can be difficult for some small companies to buy additional amounts to create reserve stocks, but the volume of gas that needs to be in storage is not that huge. We just need to start implementing the rules, and the market will start working,” he said. katya.zapletnyuk@icis.com and ekaterina.kravtsova@icis.com