Ukraine increases gas import capacity from EU to 14.5 bcm p.a.

Ukraine will be able to increase its natural gas import capacity from EU countries to approximately 40 mcm/day as of Jan. 24 compared to 31.5 mcm/day currently, according to a European Commission press release on Jan. 23. This was possible due to an increase in gas supply capacity from Slovakia. “I appreciate the readiness of Slovakia to increase reverse gas flows between our countries. I count on further steps to unlock the full 100 bcm per year capacity of the interconnector between Ukraine and Slovakia,” said Ukrainian Prime Minister Arseniy Yatsenyuk, as cited by the press release.

Alexander Paraschiy: The move is an important step for Ukraine towards reducing Ukraine’s natural gas dependence on Russia. The increased capacity implies Ukraine is now able to import annually up to 14.5 bcm of gas from EU countries, compared to 11.5 bcm earlier, which is about 70% of its total import needs (we estimate its needs at 21 bcm p.a.) Last year, EU countries supplied Ukraine with 5.0 bcm of natural gas (+135% yoy). Russia remained the main supplier of gas to Ukraine in 2014, though its volume decreased 44% yoy (to 14.4 bcm). Imports from Russia could have been fallen more in 2014 if Russia hadn’t granted a huge discount for its gas in 1Q14 (when Ukraine imported 6.1 bcm for USD 269/tcm).

With the further increase of Ukraine’s import capacity from the EU, Ukraine will gain more leverage in its gas talks with Gazprom. These talks may start soon, given that the interim contract for gas supply –which offers Ukraine a USD 100/tcm discount – ends in late March, and Ukraine won’t be willing to import gas from Russia without a discount.