Gazprom: Ukraine Needs To Double Its Gas Inventory Before Winter

Gazprom has said that Ukraine needs to double the amount of its stored natural gas to have enough for the coming winter.

Vitaly Markelov, the deputy chief executive officer of the Russian gas monopoly, told reporters at a May 13 news conference that Ukraine now has about 9 billion cubic meters in storage. “To pass through autumn and winter periods normally,” he said, “we estimate that [Ukraine] needs [a total of] around 18.5 bcm (billion cubic meters).”

The Russian government’s majority-owned Gazprom has threatened to cut off Ukraine’s gas supply and refuses to negotiate with Kiev about the price of gas, unless Ukraine pays for the gas it received in April. That payment is past due, and as a result, Gazprom says Ukraine must pay in advance for any gas it needs, effective June 1.

In 2009, Ukraine contracted to buy a fixed amount of gas from Gazprom at a price of $485 per 1,000 cubic meters, the highest price for gas paid by any European customer. Last year, Gazprom reduced the price to $268.50 per 1,000 cubic meters after Viktor Yanukovich, who was then Ukraine’s president, rejected closer ties with the European Union.

But Yanukovich was ousted in February, and Gazprom restored the older, higher price.

Gazprom CEO Alexei Miller says the company would notify Ukraine soon that if it does not pay the April bill by June 2, it will receive no more gas from Russia, starting the very next day. He made the comment May 12 during a meeting with Russian Prime Minister Dmitri Medvedev.

Medvedev agreed, saying, “It’s time to stop coddling [the Ukrainians], notify them tomorrow and move to pre-payments.”

The problem could affect more than Ukraine in the coming winter. Disagreements between Russia and Ukraine have led to cuts in gas supplies to all of Europe in the past 10 years. About half the gas that Russia imports to Europe goes through Ukraine. A Gazprom official said May 13 that gas is continuing to flow to Europe through Ukraine.

Meantime, the European Union is imposing more sanctions on Russian companies and individuals in response to Russia’s March decision to annex Ukraine’s Crimean Peninsula. The new sanctions include denial of visas to 13 people and a freeze on their assets in EU banks. The new penalties also freeze the assets of two companies in Crimea.

Europe has been reluctant to impose stronger sanctions on Russia. But France's European affairs minister, Harlem Desir, said more sanctions might be imposed if Russia is found to be interfering with the presidential elections in Ukraine, scheduled for May 25.

So far, the EU has put 61 people on its sanctions list.

Russia countered that such sanctions wouldn’t help end the dispute with Ukraine, but in fact may make matters worse. The Foreign Ministry in Moscow issued a statement saying that the recent votes favoring self-rule in two predominantly Russian-speaking Ukrainian regions should awaken Kiev to “the depth of the crisis” in Ukraine.

The statement didn’t explicitly support independence Luhansk and Donetsk, but said the referendums in these regions demonstrate that the government in Kiev should open talks with dissidents there.

"Moscow hopes ... the EU and United States will use their influence on the current leadership in Kiev so that issues of state structure and respect for the rights of regions are discussed soon -- in any case before the election scheduled for May 25," the statement said.

By Andy Tully of Oilprice.com