* Deadline for Ukraine gas payment expired at midnight
* EU officials say gas storage around half-full
* Questions raised over legality of reverse flow
* Ukraine major gas transit nation for EU supplies
(Updates throughout with detail, end of talks)
By Barbara Lewis
BRUSSELS, April 8 Ukraine's energy minister, EU
officials and industry representatives held talks on Tuesday on
cutting reliance on Russian gas as tension with Moscow drove
home the urgency of finding alternative energy sources and
Concerns reached a new pitch after pro-Moscow protesters
seized buildings in eastern Ukraine's mainly Russian-speaking
industrial heartland, which Kiev said is a replay of events in
Crimea, the peninsula Moscow annexed last month.
At the same time, Kiev missed a midnight deadline to reduce
its $2.2 billion debt owed to Russia for natural gas supplies.
That adds to concerns Russia could cut off Ukraine's gas
supplies, with possible knock-on effects for the European Union.
Ukraine's Energy Minister Yuri Prodan was quoted by Interfax
news agency as saying Russia's decision to nearly double gas
prices to Ukraine was unjustified and Kiev would not pay.
"If the situation is not resolved, there will be a threat
not only for the supply of gas to Ukraine, but also for the
transit of gas to Europe," Prodan said.
Moscow also has a great deal at stake. Its gas exports to
the European Union provide state-controlled exporter Gazprom
with an average of $5 billion per month in revenue.
An invitation to gas industry officials to Tuesday's talks,
seen by Reuters, said Europe's gas storage levels were
comfortable after a mild winter, but it was already time to
prepare for the next heating season.
One source close to the talks, speaking on condition of
anonymity, said the Commission had asked member states to report
back with full details of infrastructure and storage, saying
efforts must be made to fill storage well ahead of next winter.
Following previous crises in 2006 and 2009 over Kiev's
unpaid gas bills, which led to the disruption of exports to
western Europe, the European Union has taken steps to bolster
its energy security, including increased gas storage.
Analysts say nowhere near enough has been done, but EU
officials say there is renewed determination to act, alongside a
recognition that changing Europe's energy system will take time.
Russia provides Ukraine with around half of its gas and the
European Union with roughly one third of its demand, some 40
percent of which flows via Ukraine.
Denmark put forward the idea, adopted by an EU summit in
March, that the Commission should draw up by June a detailed
plan on increasing energy security and says this time around the
mood is completely different.
"There is no doubt that this is a game-changer," Danish
Foreign Minister Martin Lidegaard told Reuters by telephone last
month. "The whole Ukraine crisis has definitely changed the
atmosphere during our (energy) discussions."
The European Commission, the EU executive, said Energy
Commissioner Guenther Oettinger chaired the two meetings on
Tuesday as a follow up to the March summit on energy security.
One meeting brought together industry and Ukraine's energy
minister to discuss supply security over the coming months and
beyond and the other was of the EU "gas coordination group", at
which experts from all 28 members periodically debate storage
"The role of storage and alternative domestic production
sources need to be carefully explored," the Commission said in a
statement following Tuesday's talks.
Domestic sources of gas refer largely to shale gas, whose
development in Europe has been limited by environmental
opposition and more challenging geology than in the United
In addition the European Union is working on increasing
capacity to reverse the flow through some pipelines so that gas,
including some imported from Russia, can be sent back eastward
to Ukraine from EU countries.
Oettinger has been trying for months to broker a deal with
Slovakia to allow Ukraine to receive up to 8 billion cubic
metres a year in a reverse flow of gas.
Ukraine, however, says progress on this has not been fast
enough while Russia says it would be illegal.
The source close to the talks said industry was also worried
that reversing flows to Ukraine was in breach of gas contracts.
(Additional reporting by Henning Gloystein in London, Francesco
Guarascio and Robin Emmott in Brussels and Pavel Polityuk in
Kiev; Editing by Anthony Barker and David Evans)