Slovak PM calls for talks with Ukraine, Russia, EU on gas flows

Reuters

By Jan Lopatka

PRAGUE (Reuters) - Slovakia's Prime Minister Robert Fico on Thursday called for talks with Ukraine, Russia and the European Commission to ensure his country can reverse natural gas flows to Ukraine without violating existing contracts.

Fico told reporters he supported projects to send gas to Ukraine but needed to ensure his country gets paid and avoids violating contracts with Russian gas supplier Gazprom.

"The optimal solution would be a meeting of representatives of Ukraine, Slovakia, Russia and the European Commission, to discuss conditions under which Slovakia would be involved in reverse flow of gas," Fico told a news conference posted on the government's website.

Relations between Ukraine and Russia have been in crisis since the ouster of pro-Russian president Viktor Yanukovich and Russia's annexation of Ukraine's Crimea region.

Russia tore up a discount on its gas negotiated under Yanukovich and this month raised the price Ukraine must pay for gas from Gazprom by 80 percent.

Slovakia is the EU's best-placed member nation to pump gas to neighbour Ukraine should Russia reduce or shut off supplies from the four pipelines that feed Slovakia via Ukraine.

But reversing flows along any of these pipelines would breach terms of contracts with Gazprom, a spokesman for Slovak pipeline operator Eustream said this week.

Russia is Europe's biggest gas supplier, providing around a third of continental demand, which at current daily flows of 270 million cubic metres (mcm) is worth almost $100 million a day. Around 40 percent of Russia's gas is currently exported through Ukraine and some of it further through Slovakia.

Fico said the government was investigating whether there were technical solutions to reverse flows without infringing contracts or incurring sanctions.

One possibility could be to allow flow reversal along a pipeline from Vojany to Uzhorod in Ukraine which could supply 9 billion cubic metres of gas per year, he said.

He added his European Union member nation also needed to make sure it gets paid for taking such steps and for any gas shipments to Ukraine, and needed guarantees from a third party such as the EU.

"We want to help but we do not want the idea take root that nobody will pay for such services," Fico said.

Ukraine missed a deadline this week to pay Gazprom $2.2 billion for gas it has received.

Fico said he saw a risk in low levels of gas reserves in storage in Ukraine which could affect its ability to ship gas to Europe.

He said an extra $5 billion worth of gas was needed to be added to Ukrainian storage sites.

STOCKS CUSHION BLOW

Reversing flows from West to East requires excess gas to be pumped out of storage from within the EU, and healthy stocks following a mild winter would cushion the effects of a shortfall in Russian supplies.

Gas inventories in Germany, Europe's top gas consumer and Russia's largest consumer, are currently 58 percent full and hold the equivalent of 53 days of average daily gas consumption.

Polish inventories are almost 70 percent full, enough to meet 28 days of demand, while the Czech Republic's gas storage facilities are 40 percent full and can meet 20 days of demand.

Because these are annual figures averaged between high demand winter days and days of low gas usage in summer, stocks going into the warmer spring and summer seasons would likely last longer than indicated.

"In the short run, Europe could easily 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 Analysis.

"Flows would likely go on through Yamal-Europe, Nord Stream," he said, referring to Russian pipelines carrying gas into Germany through Belarus and via the Baltic Sea.

Korchemkin acknowledged, however, that a total cut-off of Russian gas next winter would be very difficult for Central Europe to handle.

(Additional reporting by Michael Kahn in Prague, and Alexander Winning and Henning Gloystein in London, editing by David Evans)