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Ukraine, Russia gas deal may be just enough to get through winter
October 20, 2014 / 11:57 AM / 3 years ago

Ukraine, Russia gas deal may be just enough to get through winter

LONDON (Reuters) - An interim natural gas deal by Moscow and Kiev, reached over the weekend, could supply just enough to get Ukraine through the winter as long as the weather does not become unusually cold, Reuters research shows.

Russia, Ukraine and the European Commission moved towards an agreement in late September and made further progress at the weekend.

The deal is expected to be finalised at meetings between officials in Brussels on Tuesday.

Russia cut off gas supply to Ukraine in mid-June following more than two years of disagreement over the price and after relations between the two countries deteriorated over Moscow’s annexation of Crimea and fighting in the east of Ukraine.

Not all details of the agreement are known, but below is a summary of the main points.

VOLUME

Russia is likely to deliver 5 billion cubic metres (bcm) of gas by the end of March, which should just be enough to meet demand.

Ukraine’s annual gas use is typically around 50 bcm, although this figure varies depending on weather conditions and economic output.

Accessing all available sources, Ukraine is likely to have access to 42-53 bcm of gas to meet its annual demand.

Over half of its consumption is usually provided by Russia, and Moscow probably delivered 5 to 10 bcm between January and June this year before stopping supplies.

Ukraine’s gas storage sites are currently filled to an average of 52.5 percent, equivalent to 16.8 bcm.

It also has domestic production, though the loss of gas-producing Crimea means its output will be much lower this year than its usual figure of over 20 bcm.

Analysts say 5-6 bcm could come from EU countries by the end of the year.

That brings Ukraine’s accessible gas to 42-53 bcm, which should be enough to meet its annual demand, barring a spell of colder-than-usual winter temperatures or unforeseen supply outages.

PRICE AND DEBT PAYMENTS

Ukraine will pay $385 per 1000 cubic metres of gas for the winter period lasting until March 31, 2015.

The price for Russia’s gas over the following summer period will fall to $325 per 1000 cubic metres.

That is roughly in line with what most western European utilities pay for imported gas from Russia.

Russia says that Ukraine owes it around $5 billion in unpaid bills for gas supplied at the end of 2013 and in 2014.

Kiev has said it will be prepared to repay Russia $2-$3 billion by the end of the year, if the remaining figure could be negotiated later.

Ukrainian state-run energy firm Naftogaz and Russian state-controlled gas firm Gazprom have both lodged cases with the Stockholm arbitration tribunal to review their gas transit contracts.

All debt payments, on which Russia has been insisting, will be made only after a verdict from the International Court of Arbitration in Stockholm.

Additional reporting by Barbara Lewis in Brussels and Vladimir Soldatkin in Moscow; editing by Jane Baird

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