Monday’s stock market crash appeared…
America’s natural gas industry has…
First it was a cutoff of Russian natural gas, now Ukraine faces Moscow’s suspension of coal deliveries as winter approaches. As a result, Kiev has been forced to declare a state of emergency in its electricity market as it faces the onset of a dark, frigid winter.
Historically, Ukraine has been self-sufficient in coal, but fighting between government forces and pro-Russian separatists in eastern Ukraine’s Donetsk and Luhansk regions has closed more than half the coal mines there and shut down rail lines needed to ship coal to power plants, according to Europe’s coal association, Eurocoal.
Because of the fighting, Ukraine had been relying on coal from Russia, but on Nov. 24 its largest energy company, DTEK, said Moscow had suspended those imports three days earlier. Ukraine has imported about 1.3 million tons of Russian coal since August.
DTEK said in a statement that the suspension came without warning and that Ukraine had made advance payments to its Russian suppliers under the terms of their contract. “We hope the situation will be clarified soon and supplies will be resumed in regular regime,” the statement added.
Until then, Ukraine will need to import between 1 million and 2 million metric tons of coal to compensate for the loss before the spring thaw in 2015. Meanwhile, the country’s hydro and nuclear power plants also are working hard to satisfy its energy needs, but Ukraine’s aging power infrastructure is old and probably not up to the task.
The situation is ironic because Ukraine has been one of Europe’s leading coal producers. In 2013 it produced 60 million metric tons of coal, but the fighting, which Western leaders say is fomented by the Russian government, has shut down 66 coal mines in eastern Ukraine, leaving only 60 more still in service. Until the fighting broke out, Ukraine used coal to generate about 40 percent of its electricity.
In an interview with the television channel 112 Ukraine, Dmitry Marunich, a co-chairman of the Ukrainian Energy Strategies Fund, said Russia’s suspension of coal deliveries comes at the worst possible time because Kiev has “little chance to find other sources to substitute for it.”
Marunich said that Ukraine is already too busy contending with other problems involving Russia to devote the time and money to arranging imports from other countries. One such contract, he said, was signed with South Africa to help wean Ukraine from Russian coal, but South Africa cut off shipments earlier in November, citing political instability in Ukraine.
As a result, Marunich warned of power shortages and resulting rolling blackouts during the coming winter.
Making matters worse is the status of the gas Ukraine needs to import from Russia. Moscow shut off that supply in June because of a dispute over unpaid bills and pricing. In October, with the help of the European Union, Kiev and Moscow reached a tentative deal to restore gas shipments, but they haven’t resumed because Russia demanded that Ukraine pay for the gas in advance and Ukraine has yet to do so.
Ukraine has some gas in storage, but the amount it now holds would meet the country’s needs for only about three-and-a-half months.
By Andy Tully of Oilprice.com
More Top Reads From Oilprice.com:
Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com