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UPDATE 2-Slovakia signs deal to send some gas to Ukraine
April 28, 2014 / 1:30 PM / 3 years ago

UPDATE 2-Slovakia signs deal to send some gas to Ukraine

* To supply around 8-9 bcm per year from autumn
    * EU member states looking to help Kiev
    * Ukraine says to be no problem with payments

 (Adds details, Ukrainian energy minister quotes)
    By Jan Lopatka
    BRATISLAVA, April 28 (Reuters) - Slovakia and Ukraine signed
a deal on Monday that allows the European Union to send a
limited amount of gas to Ukraine, but provides Kiev with less
than it hoped for to cushion the blow should Russia turn off
supplies.
    Ukraine has sought to secure alternative supplies to those
from Russia's Gazprom since Moscow annexed Crimea last
month and Gazprom raised prices for its gas to levels Ukraine is
refusing to pay.
    Russia's seizure of Ukraine's Crimea region has set off the
most serious East-West rift since the end of the Cold War,
resulting in EU and U.S. sanctions and raising the threat of
interruption of gas supplies from Russia to Europe.
    Any so-called reverse flow supplies Ukraine does contract,
however, will likely be from Russia delivered through Slovakia
or the Nord Stream pipeline running through Germany.
    While the amount of potential deliveries via Slovakia is
less than a third of Ukraine's yearly demand, European
Commission President Jose Manuel Barroso called the deal an
important first step in boosting Europe's energy security.
    "This contributes to greater energy security in eastern
Europe and the European Union as a whole," Barroso told
reporters after the pipeline operators of Ukraine and Slovakia
signed the deal.
    "It shows the European Union's strong commitment in support
of Ukraine's energy sector."
    Under the deal, Slovakia will make technical adjustments to
an old unused pipeline to ship around 8-9 billion cubic metres
(bcm) of gas per year starting in the autumn. 
    It is also possible there could be smaller volumes initially
before ramping up to around 9 bcm by April.
    Combined, Ukraine could eventually receive up to around
16-17 bcm per year from EU neighbours Poland, Hungary and
Slovakia, Slovak Prime Minister Robert Fico said. This
represents a little less than a third of Ukraine's annual
consumption of about 55 bcm.
    "It is a first step for gas flows from Slovakia to Ukraine
and strengthens the ties between the EU's energy market and
Ukraine," European Energy Commissioner Guenther Oettinger said
in a statement. "Deliveries from EU Member States offer Ukraine
access to gas priced on the basis of fair and transparent
principles." 
    Europe takes about a third of its gas imports from Russia,
and about 40 percent of that amount flows through Ukraine and
into western Europe via Slovakia.
    
    
    TALKS WITH HUNGARY
    Ukraine has been pushing to receive volumes of up to 30 bcm
by reversing flows on pipelines importing Russian gas into
Slovakia. Slovakia has refused this approach because it fears
this might violate its contracts with Gazprom and risk sanctions
or a supply halt.
    Gazprom's consent for such reverse flow is needed, the
Commission and the Slovak government say. 
    Ukraine's Energy Minister Yuri Prodan said his country would
soon start gas import talks with Hungary and seek EU support to
negotiate more supply from Slovakia.
    He noted Ukraine already receives deliveries from Germany's
RWE through Poland and assured suppliers from the west
they would not need to worry about payment - an issue that led
Russia to halt supplies in 2009.
    A framework agreement signed by Ukraine's Naftogaz and RWE
subsidiary RWE Supply & Trading in 2012 allows for delivery of
up to 10 bcm of gas per year and RWE has said supplies from
Russia, Norway and the EU would each account for about a third
of the gas.
    "Today we have supplies from Poland, delivered by RWE, and
we have no problem with payments," Prodan said. "In the near
term we will have reverse flows from Hungary as well. I want to
assure you that there will be no problems with payments there
either."
    RWE, which has started pumping modest amounts to Ukraine
from Poland, has said it could ramp up the shipments once there
is an agreement on the Slovak flows.
    Moscow, which does not recognise the Ukrainian government
that replaced ousted President Viktor Yanukovich in February,
nearly doubled the gas price for Ukraine to $485 per 1,000 cubic
metres from April. Kiev, which is in deep financial trouble, has
refused to pay.
    Gazprom has said Ukraine owes it more than $2 billion for
gas already delivered.

 (Additional reporting by Barbara Lewis in Brussels, writing by
Michael Kahn, editing by William Hardy and Jason Neely)

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