UPDATE 1-Ukraine, Slovak authorities still in gas-link talks

Thu Nov 28, 2013 9:22am EST

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By Natalia Zinets and Christoph Steitz

VILNIUS/BERLIN, Nov 28 (Reuters) - Ukrainian and Slovak authorities are in "very constructive negotiations" and could sign a reverse-flow pipeline deal next week to curb Ukraine's dependence on Russian gas, officials from Kiev and Brussels said.

European Commission officials and Ukraine's energy minister said earlier this month a deal to ship gas through Slovakia was all but agreed and just needed to be signed by both sides.

Since then, Kiev has said it is not ready to sign a broader deal with Europe called the Eastern Partnership, a four-year-old programme of outreach to former Soviet states.

But officials said the pipeline agreement was still possible, which would mean that companies can change the destination of Russian gas intended for the EU.

"We are discussing all details in a bid to sign next week," Ukrainian Energy Minister Eduard Stavytsky told Reuters in Vilnius.

The first shipment of gas from Europe via the Slovak link could take place in the second half of next year, he added.

European Energy Commissioner Oettinger said the deal was not complete but that "very constructive negotiations" continued, when he was asked about the pipeline agreement on the sidelines of an industry conference in Berlin.

Brussels has a keen interest in strengthening ties with Kiev, whose gas price disputes with Russia's state-controlled Gazprom have disrupted supplies to Ukraine and the European Union.

Along with the talks on a wider political partnership, EU officials have been seeking to convert Ukraine from a transit state for Russian gas into an energy hub.

Under this plan, Ukraine would develop its own shale gas reserves and ship gas to and from the 28-country European Union with the help of pipelines in both directions and reverse flow.

Ukraine is torn, however, between pressure from Russia to stay within its orbit and popular domestic clamour to throw in its lot with the EU.

Talks in Lithuanian capital Vilnius beginning on Thursday between Ukrainian President Viktor Yanukovich and EU leaders are expected to be frosty.

Energy analysts say a reverse-flow agreement can still be reached regardless of wider politics.

"The Slovak reverse flow is just a regulatory deal which will be resolved," said Jonathan Stern, chairman and senior research fellow from the Oxford Institute for Energy Studies.

"The question is how much gas is on offer. I tend to think more like 2 to 3 billion cubic metres (rather than the 5 to 10 bcm that some have mentioned) - useful but not definitive." (Additional reporting by Pavel Polityuk in Kiev and Barbara Lewis in Brussels; Writing by Barbara Lewis; Editing by Dale Hudson and Jane Baird)

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