LONDON (Reuters) - Russia should let Europe upgrade Ukraine’s gas grid and transport fuel across it, so political tensions between Kiev and Moscow do not cause regular supply problems, the head of Austrian energy regulator E-Control said.
Russia broke off talks with Ukraine on Tuesday after Kiev angered the Kremlin by asking European Union investors to help modernize its pipeline network, which supplies one fifth of Europe’s gas.
Walter Boltz, head of E-Control and vice chairman of the European Regulator’s Group for Electricity and Gas (ERGEG), told Reuters on Tuesday it was in everyone’s interest for European consumers to find a solution to the problem that has cut supplies to Europe in two of the last five winters.
“It has to be a European solution because the current model, where Russia is basically responsible commercially for the transit, is overlaid by all this political background ...
“(This) makes the relationship between Ukraine and Russia very difficult, very delicate and likely to erupt every other month,” he told Reuters in an interview in London.
“There is really no reason why this should be done by Russia and why we shouldn’t pay for it ... We buy the gas on the Russian-Ukrainian border and we worry about the transport from there ... I think there is no other alternative.”
Austria was one of the countries most affected by the mid-winter Russian gas crisis that left parts of Europe without heating fuel in the middle of one of the coldest winters in decades.
Boltz, who also sits on the Council of European Energy Regulators, said the threat of another supply crisis this year remained despite Kiev and Moscow settling the last row with a long-term agreement on the price Ukraine will pay for its own supply.
“I think there is a realistic chance that even before that we have some problems again ... We are in a very delicate situation,” he said, pointing to Ukraine’s financial problems.
“It could well be that some months they are just not able to pay and Russia is also in a much worse situation to give them credit.”
Boltz said it was natural for Russia to deliver the fuel to its customers at the Ukrainian border with Europe when Ukraine was part of the Soviet Union. But the world has changed.
“Now it seems Russia has had increasing difficulty in managing this transit, and not for technical reasons but for some commercial and, I would say, political reasons,” he said.
“It really is in the common interest of Russia, Ukraine and Europe that we find a good solution for the transit of gas.”
INTERNAL IMPROVEMENTS
Boltz told the SMI LNG 2009 conference in London the crisis had also been a lesson on the importance of diversifying supplies of gas and improving grid connections within Europe.
Asked what could be done to reduce vulnerability to supply cuts, he told Reuters: “There are a lot of relatively inexpensive and simple measures that could be implemented quickly, in 12 to 24 months, to make the system more able to deal with interruptions.”
He added that regulators must clamp down on protectionism by incumbent suppliers.
Pipelines that currently flow in only one direction - like the one flowing into Spain from France and the Trans-Austria Gas pipeline - could be modified in just a few months, Boltz said.
If the TAG pipeline, with a capacity of over 30 billion cubic meters a year could flow in both directions, cargoes of LNG could be brought to Italian facilities and the gas pumped through the Baumgarten gas hub and on to the Czech Republic, Slovakia, Hungary and Slovenia - which were among the hardest hit by January’s supply cuts.
“What we need to do is agree that those are the measures and we need to ensure financing because, commercially, companies will not pay for that,” he said.
“There are possibilities ... we can even make a difference this winter.”
Reporting by Daniel Fineren, editing by Anthony Barker, John Stonestreet
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