Page 61 - UKRRptJul19

9.0 Industry & Sectors 9.1 Sector news
9.1.1 Oil & gas sector news
Ukraine's natural gas monopoly Naftogaz may suspend imports of natural gas for its pumping into underground gas storage facilities in August 2019 due to lack of funding, the company's CEO Andriy Kobolev said on June 26. "If we do not find a solution to the financial issue [loans, eurobonds, instalments on dividends to the government] in the coming month, then in August we will stop importing for Naftogaz. We have to find money in July to pay for gas in full for August," news agency Interfax quoted Kobolev as saying. In April-June, Ukraine increased natural gas stocks in its underground gas storage facilities by 48.7% or 4.256bn cubic meters (bcm), to 13.2 bcm, according to the nation's state-owned gas transportation company Ukrtransgaz. At the same time, Ukraine plans to accumulate around 20 bcm of gas in stocks at the beginning of the next heating season.
Ukrainian gas transit operator Naftogaz has suggested that it might sign a ten-year swap agreement with Gazprom for gas transit of 60bcm/a through Ukraine starting from 2020, Kommersant reports. The swap contract structure implies that Naftogaz purchases gas from Gazprom at Ukraine’s eastern border and sells it to Gazprom at the western border having withheld a transit margin. The suggested contract structure is required for Naftogaz to bypass EU ownership unbundling restrictions, according to the paper.
Separately, Vedomosti reports that Gazprom plans to fill 11.4bcm of natural gas in European underground gas storages in 2019, or up 73% y/y, to guarantee supplies to Europe in 1Q20, even if there are potential transit issues with Ukraine.
Gazprom is unlikely to agree with the terms suggested by the Ukrainian side, given that the company has previously indicated its plans to reduce gas transit through Ukraine following the launch of the Nord Stream 2 and TurkStream pipelines. Underground gas storages in the EU are now 67.1% full, or 15.5pp above the five-year average, which has probably been driven by the uncertainty over gas supplies starting from January 2020, when the gas transit contract with Ukraine expires, as well as by low gas prices.
Russia has slashed monthly diesel exports to Ukraine to 25% of normal levels and liquefied petroleum gas exports to 40% of normal levels, reports Sergey Kuyun, director of Ukraine’s A-95 energy consulting group. To maximize market tension, Russia’s Economic Development Ministry will set levels of permitted exports each month.
In face of Russia’s cuts, Ukraine’s diesel prices could go up another 5% this summer, to 31 UAH the liter, Kuyun writes on Facebook. With most consumer goods moving around the country by truck this could imperil Ukraine’s goal to end this year with inflation at 6.3%. After the Kremlin announced the restrictions on April 18, diesel prices rose by 4%. With the June 1 export restrictions, Ukraine loses 25% of its diesel and 15% of its LPG. “Is it a lot or a little?” asks Kuyun. “For diesel fuel - a lot. For gas - less, but also not easy.”
61 UKRAINE Country Report July 2019 www.intellinews.com