Ukraine plans to accumulate 12.5 bcm of gas as of end-3Q13

Ukraine’s Energy Minister Eduard Stavytskiy revealed a plan to accumulate 12.5 bcm of natural gas in underground storage facilities by October 1, Interfax reported on August 19. As of mid-June, Ukraine had 9.0 bcm of gas in storage, and the government’s earlier announced plan was to have 14 bcm of gas as of mid-October.

Alexander Paraschiy: The revealed plan suggests Ukraine plans to import about 5 bcm of gas in 3Q13 (-40% yoy), which will amount to 16 bcm of imports in 9M13 (-35% yoy). To meet the import plan approved by the government (27 bcm in 2013), Ukraine will have to import 9 bcm of gas in 4Q13, or 1.8x more qoq (8% more yoy). Technically that’s feasible, but only in the event that there’s warmer than average weather in November-December in both Europe and Ukraine (the plan should work out if the weather is the same as the last three years).

It looks like the government decided to import the minimum possible amount of gas to conserve as much foreign currency as possible, with the plan of responding to weather conditions asrthey emerge this winter or even making a bet on a warm winter. Its planned end-3Q13 gas stock is 36% less than a year ago and 40% less than two years ago.

Another possible explanation of such a lean gas import plan for 3Q13 is the government’s intent of spreading out the impact of the two heaviest factors on Ukraine’s 2H13 foreign currency reserves: gas imports and individual cash demand from the population. In particular, the government might have decided to postpone the increase in gas imports after the peak in demand for cash dollars (usually in October) is over.