Ukraine secures alternative EU gas sources for 1Q13

Ukraine is close to finalizing a deal on natural gas supplies from Hungary and is actively trying to secure supplies from Slovakia, with plans to import gas from these two countries in 1Q13, Ukraine’s Energy Minister Eduard Stavytskiy told a Feb. 7 press conference.

Alexander Paraschiy: As experience tell us, importing gas from the West does not look like a bargain alternative for Ukraine: imported gas from Germany was just 1% (USD 5/tcm) cheaper than what was offered by Gazprom in November. Based on this, we estimate the December and January imports of European gas would have been less beneficial for Naftogaz compared to the Russian alternative, as average spot prices in Europe were USD 9/tcm higher for these two months than in November.

However, the European prices might seasonally decline in the spring, which would make the Western alternative more attractive. The key question is capacity to export gas from the West – so far we do not see any basis for Ukraine importing up to 5 bcm from the EU.