Ukraine Rejects Delay, Offers More Gas Import Capacity

The Ukrainian gas TSO (GTSOU) has offered an alternative way for traders to import gas from the west this summer, following its announcement that it will have to close the line entering at Budince on the border with Slovaka for seven weeks.

“It is in our [Ukraine and Slovakia's] joint interests to minimise interruption of the use of Ukrainian gas storages for the EU, especially given current year market conditions. However, we cannot risk technical security,” it said.

Netting off flows of Russian gas from east to west at another and much larger interconnection point (IP), Velke Kapusany, would allow 200mn m³/day into Ukraine, while Budince only carries 42.5mn m³/day. This switch of routes would not require any additional financial or technical investments from Slovakia's TSO Eustream, it said. 

Eustream has already said it can offer virtual interruptible capacity at Velke Kapusany for July and possibly thereafter, depending on how much gas flows from Russia on any given day.

The current transit volume of Russian gas from Ukraine to Slovakia via IP Velke Kapusany is about 109mn m³/d, which means that the same volume potentially could be imported to Ukraine by virtual reverse flow (netting of flows). The virtual reverse at IP Velke Kapusany has been possible since March 1, 2020. Considering the volumes recently sold by Gazprom to be delivered in Q3, there is no chance of a sharp reduction of Russian transit, it said.

But the GTSOU refused to defer the start of work on the Budince pipeline any longer than it deemed necessary – August 11 – as its primary duty is safe gas transport. “As this is the only gas pipeline with the firm capacity towards Ukraine from the EU, we have to act in the best interests of the country gas security of supply,” it said.

The TSO had proposed a single virtual interconnection point (VIP) at the border, saying it was fully aligned with EU energy law, gas network codes and the best business practices, spirit and goals of Energy Community Treaty and Energy Union, but Slovakia's TSO had resisted it.

Ukraine's TSO said: "Such virtual points were recently created at Poland-Ukraine and Hungary-Ukraine borders. Those countries also voluntarily implemented the capacity allocation management network code at those virtual interconnection points and use auction-based capacity allocation mechanism via booking platforms, which brings more transparency and flexibility to shippers.

"Eustream still uses ad hoc first-come-first-served approach, which is highly criticised by many shippers for non-transparency. However, we understand that implementation of those standard EU rules is not mandatory for Slovakia and subject to decision of the Slovakian energy regulator," it said.

It also said it “completely” rejected allegations that it was not giving due notice of its plans, as it is postponing the works until August 11 to provide shippers enough time to react and adopt. However, "we still believe in finding some other options with no change in the repairs schedule. August 11 was the latest date to start work if it were to complete the repairs by the start of the next heating season (October 1).

"Eustream’s proposal would have threatened the security of the supply of Ukraine and the whole region. In addition, the current severe flood in the region requires our immediate reaction on other more important repairs caused by the extreme weather conditions.

“Two options are being available for our partners at Eustream, which are fully aligned with EU regulations: 1) creation of a single virtual interconnection point (VIP) by uniting IP Budince and IP Velke Kapusany, and 2) allowance free transfer for shippers of the booked capacities from IP Budince to IP Velke Kapusany during the period of maintenance. Our principal position is that shippers should not be penalised and bear additional costs for such unexpected events.

"The suggested approach will be tested on the border with Poland as soon as 1st July 2020, where a similar virtual point combines two physical pipelines on the border. The TSOs of both countries expected to flexibly redirect flows between physical pipelines with no changes to commercial flows. We consider this option as the safest and fastest one for the market and TSOs.

"The Ukrainian TSO expects appropriate permissions from the Ukrainian regulator regarding the possibility of free of charge transferring of the booked capacities from IP Budince to IP Velke Kapusany at the Ukrainian side in the coming days. We hope that Eustream and the Slovak regulator will find a similar opportunity to decide on either creation of a single virtual point or the free transfer of the booked capacities. We are happy to state, that the European Federation of Energy Traders welcomes the solutions offered by GTSOU."