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2018-03-14 11:40:00

RUSSIAN GAS FOR EUROPE

RUSSIAN GAS FOR EUROPE

PLATTS - Relations between Russia and Ukraine in the gas sector have been infamously strained for more than a decade, with the memory of the cut in supplies to Europe in both 2006 and 2009 still fresh in people's minds.

There was a brief period of relative stability in the past two years while the Stockholm arbitration court considered its verdict in the dispute over the 2009 Gazprom/Naftogaz supply and transit deal.

But the dispute erupted again last week after the court ruled in Naftogaz's favor on the transit element of the case, awarding Naftogaz $4.6 billion in compensation for Gazprom's underuse of its transit network.

The net award to Naftogaz was $2.6 billion across the entire case after the court previously awarded Gazprom a little over $2 billion in the supply ruling.

Gazprom CEO Alexei Miller accused the court of "double standards" in its arguments and vowed to both appeal against the court's rulings and to cancel the contract altogether, saying it wasn't Gazprom's responsibility to solve Ukraine's economic problems.

Ukraine hit back, its President Petro Poroshenko saying Gazprom was clearly "unwilling" to fulfill its contractual obligations and accusing the Russian company of blackmail.

The tit-for-tats at times made for pretty ugly reading.

What is important now, though, is to navigate through the political noise coming from both sides. The critical question is: what is likely to happen next?

In a nutshell, the answer is: a lot of noise but probably nothing to impact European gas markets.

The European Commission last week said it was again ready to broker talks between Russia and Ukraine to resolve any disputes that could potentially impact Russian gas flows to the EU, as it has several times in the past.

But Russia's energy minister Alexander Novak bluntly refused the offer: "There are no trilateral talks planned," he said in Moscow this week. "All the issues are based on contracts and the relationship between commercial organizations, between Gazprom and Naftogaz. All these issues should be dealt with by these companies."

LEGAL PROCESS

The legal process is also far from over — in fact in some ways it is just beginning.

Gazprom said it formally notified Naftogaz of its intention to terminate the 2009 contract on Monday, March 5.

If the parties are unable to reach a resolution within a certain timeframe, the issue is referred to — guess where — the Stockholm court of arbitration.

Ukraine claims the contract does not provide for unilateral cancellation, but if — as seems likely — the dispute goes back to Stockholm it will probably take years before a ruling is made.

With the contract set to expire at the end of 2019 anyway, it is likely that any decision from the court will not have any practical impact.

The same is true for the financial settlement from the dispute.

According to the final Stockholm ruling, Naftogaz is owed $2.6 billion by Gazprom. Will it see the money any time soon? Almost certainly not.

Gazprom — which had been seeking more than $56 billion from Naftogaz for not buying the contractually agreed volumes of gas — has already appealed against the court ruling from December awarding it just $2 billion, and also plans to appeal against the transit ruling by the end of March.

These appeal processes could also drag on for years, so Naftogaz is unlikely to see any cash in the near term.

This is an issue for the Ukrainian company — Naftogaz has said it may struggle to pay for European gas imports in 2018 after losing crucial lending from the European Bank for Reconstruction and Development (EBRD).

Naftogaz CEO Andriy Kobolev said the company would seek to initiate negotiations with the EBRD over new lending, but he said it would depend on the government moving forward with energy sector transparency and reform.

RUSSIAN SUPPLIES

Naftogaz — which over the past few years has heralded Ukraine's success in weaning itself off Russian gas — was also ordered by the court to resume imports of Gazprom gas.

It must buy at least 4 Bcm in both 2018 and 2019, which it seems happy to do, not least because under the terms of the ruling, the Russian gas will turn out to be cheaper than gas it imports from Europe as it would not include transportation costs from Germany to Ukraine.

But the two sides first need to agree on the technical terms of the supply — specifically how the new pricing mechanism would work exactly (it is now indexed to a German hub, not oil).

Talks between the two companies on the issue have stalled, with Gazprom's deputy CEO Alexander Medvedev going to some pains to stress that Naftogaz too agreed the new framework needed to be put in place before supplies could resume.

That didn't stop Naftogaz from crying foul, though, saying it needed the Russian gas to meet a sudden spike in demand caused by the Arctic weather front that engulfed most of Europe last week.

With Gazprom now wanting to terminate the contract with Naftogaz, it is questionable whether the 8 Bcm will ever reach Ukraine.
Which brings us back to transit. Under the contract Gazprom is meant to send as much as 120 Bcm/year of Russian gas via Ukraine, but actual volumes since 2009 have been considerably lower.

Will this latest dispute impact Russian gas transit via Ukraine to Europe? Almost certainly not. Both sides have too much to lose — Russia as a "reliable" supplier of gas and Ukraine as a European "ally" keen to make sure the EU gets its gas.

But Europe is also a loser in the whole messy business, with its gas supply security again under theoretical threat.

And as Gazprom and Naftogaz continue to trade barbed accusations, their reputations are also looking increasingly dented.

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Earlier:

 W.Europe
2018, March, 4, 11:25:00

RUSSIAN GAS FOR EUROPE

REUTERS - Russia’s Energy Minister Alexander Novak told European Commission Vice President Maros Sefcofic in a phone conversation that gas transit would not be at risk until Gazprom and Naftogaz fully terminated their agreement.

 

 W.Europe
2018, February, 12, 07:35:00

GAS SHORTAGE FOR EUROPE

REUTERS - “Europe completely miscalculated when they assumed that they won’t need much additional gas and if they need some it can be supplied from outside Russia,” Medvedev, who looks after exports for the world’s top gas producer and exporter, said.

 W.Europe
2018, January, 31, 10:50:00

GAZPROM SHARE 35%

REUTERS -Speaking at the European Gas Conference in Vienna, Gazprom Chairman Viktor Zubkov said the company’s share of the European gas market, where it generates the majority of its revenue, rose last year to a record high of more than 35 percent, from about 33 percent in 2016.

 

 W.Europe
2018, January, 29, 08:30:00

U.S. WANT RUSSIA'S MARKET SHARE

BLOOMBERG - The expansion of Russia’s gas pipeline to Germany under the Baltic Sea, which bypasses a number of east European nations, will allow the Kremlin to use energy as a “political tool,” U.S. Secretary of State Rex Tillerson said in Warsaw.

 

 W.Europe
2017, December, 22, 22:40:00

NEW GAZPROM'S RECORD

GAZPROM - Last year, Gazprom exported a record 179.3 billion cubic meters of gas to Europe. The upward trend continued this year: as early as December 8, 2017, last year’s record was beaten, with total exports reaching 179.8 billion cubic meters of gas.

W.Europe
2017, November, 20, 09:20:00

RUSSIA'S GAS FOR EUROPE UP

Gazprom's natural gas supplies to western Europe edged up by 3% year on year in the third quarter of 2017, according to an S&P Global Platts analysis of Gazprom data, as Russian gas deliveries to its core markets continue to outpace last year's levels.

 

W.Europe
2017, September, 4, 12:30:00

RUSSIAN GAS FOR EUROPE: UP TO 23%

Russian natural gas volumes piped via Ukraine to European consumers are up by 23.4 percent so far this year at 61.9 billion cubic metres (bcm), Ukrainian gas transport monopoly Ukrtransgaz said.

Tags: RUSSIA, GAS, EUROPE, UKRAINE, GAZPROM

Chronicle:

RUSSIAN GAS FOR EUROPE
2018, June, 25, 12:05:00

NOVATEK - KOGAS UNDERSTANDING

NOVATEK - According to the MOU, the parties agreed to explore opportunities for KOGAS to enter the Arctic LNG 2 project and possible LNG off-take from the project, participate in the LNG transshipment project in Kamchatka and other infrastructure projects, as well as develop cooperation in LNG trading and logistics optimization, including swap operations.

RUSSIAN GAS FOR EUROPE
2018, June, 25, 12:01:00

U.S. RIGS DOWN 7 TO 1,052

BAKER HUGHES A GE - U.S. Rig Count is down 7 rigs from last week to 1,052, with oil rigs down 1 to 862, gas rigs down 6 to 188 and miscellaneous rigs unchanged at 2. Canada Rig Count is up 21 rigs from last week to 160, with oil rigs up 16 to 103 and gas rigs up 5 to 57.

RUSSIAN GAS FOR EUROPE
2018, June, 22, 13:40:00

OIL PRICE: NEAR $74 ANEW

REUTERS - Benchmark Brent crude LCOc1 was up $1.05 a barrel at $74.10 by 0925 GMT. U.S. light crude CLc1 was 80 cents higher at $66.34.

RUSSIAN GAS FOR EUROPE
2018, June, 22, 13:35:00

ДОБЫЧА НЕФТИ: + 1 МБД

МИНЭНЕРГО РОССИИ - По итогам заседания расширенного мониторингового комитета большинством его участников было рекомендовано рассмотреть на предстоящей министерской встрече ОПЕК и последующей за ней министерской встрече с участием не входящих в ОПЕК стран-экспортеров нефти увеличение добычи на 1 млн барр в сутки (от текущего уровня) с распределением этого объема между участниками соглашения.

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