* 80 pct of Ukraine's storage sites are in its far west
* Healthy stocks, improved pipelines protect EU from
potential supply cut
By Henning Gloystein
LONDON, March 3 Ukraine's natural gas stocks can
meet four months of demand should Russia cut supplies and most
of reserves are in its west and far away from any potential
Russian intervention, industry sources said.
Ukraine meets around half of its gas demand through imports
from Russia, and it is also an important transit route for
Russian gas to the European Union.
Moscow has in the past cut supplies to Ukraine when
negotiating prices with Kiev, causing shortages in Ukraine and
Russia's Gazprom said on Monday that gas transit
to Europe via Ukraine was normal, but it warned that it might
increase prices for Kiev after the first quarter, raising
concerns that gas could be used for political leverage in the
To prepare for a potential disruption, Ukraine's gas transit
monopoly Ukrtransgas has been increasing its gas imports from
Russia in recent days, increasing its stocks which now stand at
four months worth of supplies, several industry sources said.
Of Ukraine's 33 billion cubic metres (bcm) storage capacity,
Gas Infrastructure Europe (GiE) data shows that around 80
percent is in its far west, so even in the case of a Russian
intervention in Ukraine's predominantly Russian east, most
storage assets would likely remain safe from seizure.
Analysts also say that a continuation of gas supplies was in
the interest of all parties.
"Until a real war, I think that all sides (Russia, Europe
and all parties in Ukraine) have a vested interest in flowing
gas from Russia to Europe," said Thierry Bros, senior gas
analyst at French bank Societe General.
"Russia needs the money from gas sales, Europe is 26 percent
dependant on Russia for its gas consumption, and Ukraine need
the money from the transit fees," he added.
In 2013 Russia exported 161.5 bcm of gas to Europe (European
Union and Turkey), 86.1 bcm of it via Ukraine, although this
volume has been declining as Russia seeks alternative routes to
Europe, such as the Nord Stream pipeline through the Baltic Sea
into Germany, or the Yamal pipeline that goes through Belarus
and Poland, also into Germany.
Ukraine itself imported 28 bcm of gas for its own use from
Russia in 2013, accounting for about half of its annual
consumption of about 55 bcm.
SUPPLY RISK STILL LOOMS
In western Europe, a mild winter and improved infrastructure
mean Europe is less reliant on Russian natural gas pumped
through Ukraine than in past years, easing worries that the
escalating crisis in Ukraine could hurt supplies.
Despite the improved situation, analysts warned that a
renewed disruption would hit Europe hard.
"Risks for Europe exist always, that is why it should pursue
even more diversification projects further and develop liquefied
natural gas (LNG) markets and new connectors in central and
southeastern European regions," said Anna Bulakh of the
International Centre for Defence Studies.
"While Ukrainian gas is less important to Europe than it was
half-a-decade ago, European gas markets still stand to
strengthen considerably if Ukraine's transit is interrupted,"
Bernstein Research said on Monday in a research note.
Benchmark European gas prices already rose to a monthly high
by the tension in Ukraine, although the mild winter means that
overall price levels remain much lower than this time last year,
when extreme cold pushed up demand across Europe and cause a