* Brussels, utilities coordinate storage injections
* German RWE, France's GDF Suez in talks to send gas to
* Seasonal gas spreads favour further storage injections
By Henning Gloystein and Alexander Winning
LONDON, April 14 European utilities are filling
up gas storage sites to prepare for a potential Russian supply
cut to Ukraine, an important transit route to Europe, taking
advantage of mild weather and healthy flows from alternative
sources such as Norway.
Amid a growing crisis between Kiev and Moscow, Ukraine's
state-run energy company Naftogaz has suspended gas payments to
Russia which says it is now owed more than $2 billion and may
have to demand advance payment for any future deliveries.
Russian state-controlled gas exporter Gazprom has
also increased its gas price for Ukraine to $485 per 1,000 cubic
metres from $268, saying Kiev is no longer eligible for previous
Russia supplies around a third of Europe's gas demand, some
40 percent of which currently transits Ukraine, but Moscow has
threatened to cut supplies if it continues to fail to pay its
bills, and warned there could be a reduction in onward
deliveries to Europe.
Although the European Commission, the EU executive, has
called on Russia to respect its gas commitments and urged
Ukraine to respect its transit agreements, there have been
several emergency meetings in Brussels to prepare for
"The Commission is discussing with Ukraine the possibility
for companies in the EU to store gas in Ukraine for next
winter," one source with the Commission said.
"Utilities are telling us that storage sites are likely to
be filled sufficiently in order to deal with a cut this summer,
but Ukraine and some southeastern EU countries which rely
largely on Russian flows coming through Ukraine may struggle
once demand rises again next winter," he added.
Gazprom stopped pumping gas to Ukraine during price disputes
in the winters of 2005-2006 and 2008-2009, leading to reduced
supplies in European countries that receive Russian gas via
pipelines that cross Ukraine.
Several major utilities, such as Germany's RWE and
France's GDF Suez have said they are in talks with
Ukraine on possible gas deliveries from their storage sites.
"In the short run, Europe could survive a complete loss of
Ukrainian transit flow until the end of October," said Mikhail
Korchemkin, director of U.S.-based consultancy East European Gas
"Flows would likely go on through Yamal-Europe, Nord
Stream...and small pipelines through Poland," he said, referring
to Russian pipelines carrying gas into Germany through Belarus
and via the Baltic Sea.
Traders and analysts say that this spring's conditions are
good to inject gas into storage.
Reuters data shows that France, Germany and Italy, the
countries with the biggest gas stock capacities, have all
stepped up storage injections during the past five days,
potentially enabling gas to be pumped to central Europe and
Ukraine should a Russian cut happen.
These three countries increased their combined gas storage
injections to more than 1,100 gigawatt-hours (GWh) per day on
Sunday from 597 GWh on April 11, Reuters data show.
A mild winter across most of Europe has left inventories
unusually full for this time of year, and a warm beginning to
spring has lowered demand further.
At the same time, healthy gas supplies from Norway and an
increase in liquefied natural gas (LNG) imports have created
oversupply, allowing utilities to bolster storage to supply
Ukraine as well as member states in the event Moscow turns off
"Spot gas prices are quite low, while prices for delivery
this summer have risen, so this allows us to buy gas cheaply now
and inject it into storage and sell it profitably in summer,
should Russian supplies to Kiev be cut," one gas trader said.
Seasonal gas spreads, or the difference in price between gas
for delivery the following day and next season, are currently at
around 13 pence ($0.22) per therm in Britain, and in the
Netherlands, mainland Europe's most liquid gas market, the
spread between the same delivery dates is at almost 4 euros
($5.56) per megawatt-hour.
The spread in Britain has widened consistently since the
start of the year, when it was at 5 pence, while the Dutch
spread has jumped from less than 1 euro in the past two weeks.
The gas curves in Britain and The Netherlands are both in
contango, meaning near-term contracts are at a discount to those
further out on the curve. This encourages utilities to buy gas
to inject it into storage and sell it when prices are higher.
On Monday, Britain's imports of Norwegian gas along the 70
million cubic metre (mcm) per day Langeled pipeline were at 66
mcm, roughly three times Friday's imports.
Oliver Sanderson, an analyst at Thomson Reuters Point Carbon
in Norway, attributed the higher imports to British utilities
requesting larger flows to boost storage injections.
"Langeled being at close to full capacity indicates buying
by storage players," Sanderson said.
($1 = 0.5980 British Pounds)
($1 = 0.7201 Euros)
(Additional reporting by Barbara Lewis in Brussels; editing by