UPDATE 2-Germany's RWE begins natural gas deliveries to Ukraine

Tue Apr 15, 2014 6:58am EDT

Related Topics

* Gas flowing via Poland

* Higher flows possible if restrictions resolved -RWE

* Based on European wholesale prices, part of 2012 pact (Adds details, background)

By Christoph Steitz and Michael Kahn

FRANKFURT/WARSAW, April 15 (Reuters) - Germany's RWE began deliveries of natural gas to Ukraine on Tuesday, marking an initial step in EU efforts to boost supplies as a diplomatic crisis involving Kiev and Moscow poses the risk of Russia turning off the taps.

A framework agreement signed by Ukraine's Naftogaz and RWE subsidiary RWE Supply & Trading in 2012 allows for delivery of up to 10 billion cubic metres (bcm) of gas per year.

Russia, Norway and the EU would each account for about a third of the gas which is to be sold based on European wholesale prices including delivery costs, RWE said.

Polish pipeline operator Gaz-System said the reverse flow at Hermanowice amounted to 4 million cubic metres per day, or 1.5 bcm annually.

It said in a statement that nominations for the capacity take place on a daily basis, adding that on April 15 the gas was being sent to Ukraine utilising the pipeline's full capacity.

In addition to Poland's reverse capacity, Hungary is able to send 3.5 bcm to Ukraine, while Romania has the potential to send 1.8 bcm, but there has been no firm agreement on its deliveries.

Slovakia is the EU's best-placed country to pump gas to Ukraine but reversing flows along any of the four pipelines that take Russian gas to Slovakia via Ukraine would require an agreement that doing so does not violate current contracts with Russian gas exporter Gazprom.

Slovakia and Ukraine are holding talks on Tuesday on conditions for reverse flows of natural gas to Ukraine of up to 9 bcm per year.

A political crisis has erupted between Kiev and Moscow following the ouster of pro-Russia Ukrainian President Viktor Yanukovich and Russia's annexation of Ukraine's Crimea region.

Russia has also nearly doubled the gas price it charges Ukraine, tearing up a discount agreed under Yanukovich and raising EU fears of a supply cut off as Kiev owes Gazprom more than $2 billion.

If Moscow were to scale back natural gas deliveries to Ukraine, EU states have said they would reverse the flow of pipelines that deliver Russian gas, pumping fuel back towards Ukraine.

The volumes involved are small compared with Ukraine's demand of more than 50 bcm a year, but would help in the event of a Russian cut-off.

RWE said it delivered about 1 bcm to Naftogaz in 2013, adding further deliveries to the Ukraine were possible "if various transport restrictions at the Slovakian/Ukrainian border are politically and technically resolved within the next weeks or months".

The German utility, which will hold its annual general meeting on Wednesday, said last week it was in discussions with Naftogaz about possible gas deliveries. (Additional reporting by Michael Kahn and Anna Wlodarczak-Semczuk in Warsaw and Henning Gloystein in London; editing by Maria Sheahan and Jason Neely)

FILED UNDER:
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article