Ukraine increases Russian gas imports, braces for price hike

KIEV/LONDON Mon Mar 3, 2014 7:07am EST

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KIEV/LONDON (Reuters) - Ukraine has increased gas imports from Russia over the last few days, a spokesman for Ukraine's gas transit monopoly said on Monday, amid warnings that state gas producer Gazprom might scrap a discount on prices.

As concerns grow over gas supplies after Russian President Vladimir Putin won parliamentary approval to invade Ukraine, analysts say Kiev is trying to import as much gas as possible at the lower prices.

Moscow, enraged with Ukraine's new pro-EU government, has warned Kiev it could lose the discount it currently gets from Gazprom due to Kiev's outstanding gas debt.

"We doubled our gas imports from Russia. We imported 45 million cubic meters of gas on March 1, 2014, compared with 20 million on March 1, 2013," said Maxim Belyavsky, a spokesman for Ukraine's gas transit monopoly Ukrtransgas.

Ukraine is a major buyer of gas from Gazprom, which exported

almost 26 bcm of gas to its neighbour last year, more than half of the 50.4 bcm it consumed.

Russian gas industry sources also said Ukrainian state energy company Naftogaz had imported 27.6 million cubic meters (mcm) on February 26, 45.8 mcm on February 27, 60 mcm on February 28 and 44.5 mcm on March 1.

This was compared with 28 mcm per day as of February 24, according to two Russian industry sources.

Both Gazprom and Naftogaz declined to comment on the increase in gas supplies.

TRANSIT THREAT

Ukraine, a sprawling country of 46 million people, is also a key transit route for Russian gas to the European Union and Turkey, where Gazprom increased its supply share to 30 percent in 2013 by boosting exports to a historic high of 162.7 bcm.

More than half of that, or 86 bcm, went through Ukraine.

Russia has been accused of using gas as a way to pressure its neighbour, and in earlier price disputes in 2006 and 2009 Moscow has cut off supplies at the height of winter.

Gazprom says there has been no effect on transit from events in Ukraine, where the West says Russian troops have taken control of the southern Crimea peninsula, home to Russia's Black Sea fleet and a large population of ethnic Russians.

Gazprom's Deputy Chief Executive Alexander Medvedev said on Monday that transit would be at least 70 bcm this year.

But some analysts said the seizure of Crimea put the transit in jeopardy.

"(Russian President) Vladimir Putin's Crimean plan increases the risk of interruption of transit flows of Russian gas through Ukraine. Russian gas supplies via Ukraine can stop any day," said Mikhail Korchemkin of U.S.-based consultancy East European Gas Analysis.

"The heating season is ending, and Ukraine would be able to live on without any imports of Russian gas for about seven months. Gazprom would be losing about one-third of its monthly export revenue."

Andrei Kruglov, Gazprom's chief financial officer, repeated warnings that the company may increase gas prices for Ukraine after Russia agreed in December to reduce it by about a third, to $268.50 per 1,000 cubic meters from around $400, which Ukraine had paid since 2009.

The agreement to cut gas prices was reached after ousted President Viktor Yanukovich spurned an EU trade deal in favor of closer ties to Moscow. He fled Ukraine over a week ago, and surfaced in Russia on Friday.

Gazprom put Ukraine's outstanding gas bill at over $1.5 billion.

Ukraine cut Russian gas purchases last year, saying the price was too high for its fragile economy, which faces $6 billion in foreign debt payments this year. Ukraine's new rulers say they need around $35 billion over the next two years and have asked the International Monetary Fund for financial help.

"The situation with payments is worrying. Ukraine is paying, but not as well as we would like it to ... We are still thinking whether to extend the pricing contract into the next quarter based on current prices," Kruglov said during a meeting with investors in London.

The deal allowed for the price to be revised quarterly between the 5th and 10th day of the first month every quarter.

(Additional reporting by Olesya Astakhova and Denis Pinchuk in Moscow and Natalia Zinets in Kiev, editing by Elizabeth Piper and Will Waterman)

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