Naftogaz stops gas imports from Russia

Naftogaz of Ukraine (NAFTO), the state natural gas distribution and production monopoly, has stopped its purchases of Russian gas since Friday, November 8, the Russian dispatching operator reported on November 11. Gas imports declined to an average 54 mcm per day in the first four days of November (vs. 104 mcm, on average, in October) and fell by six times in the following four days until the full stop.

The same day, a source in Ukrtransgaz (Ukraine’s gas transportation monopoly) told the Kommersant-Ukraina newspaper that Naftogaz may not import any more Russian gas this year. Recall that Naftogaz owes Gazprom USD 1.36 bln for October supplies and about USD 0.7 bln for gas imported in August.

Alexander Paraschiy: Decreased gas imports for the year’s remainder clearly benefits Ukraine’s foreign currency reserves, which are under enormous pressure this month.

Naftogaz’s halt on gas purchases fulfills promises given last week by Vice Prime MinisterYuriy Boyko to minimize Russian gas purchases (by not importing it for storage) if Gazprom will be exceedingly formal in demanding that Naftogaz fulfill all its contract requirements. And such a move raises the likelihood that Naftogaz will receive new concessions from Gazprom in the form of payment delays or even discounts for gas.

Theoretically, Ukraine can live more than three months by not importing Russian gas. Its current stock of gas (about 18 bcm) and internal production of about 1.8 bcm per month will enable the nation to use about 5.5 bcm of stored gas in each of the winter months. Practically, the minimum gas amount observed in the last three years in Ukrainian storage was 7 bcm, and Naftogaz is unlikely to decrease stocks below this volume this time again. Most likely, Otchem, the second-biggest importer of Russian gas to Ukraine, will back up Naftogaz by raising its gas imports in the coming months, if needed.