‘Naftogaz of Ukraine’ Missed the Prognosis

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‘Naftogaz of Ukraine’ Missed the Prognosis

Appeared in Bulgarian at A-specto, translated by Valentina Tzoneva exclusively for SouthFront

Kiev drastically missed the prognosis for the price of natural gas. According to the opinion of analysts from the Ukrainian gas company, ‘Naftogaz of Ukraine, the blue fuel had to get cheaper by $5 per 1,000 cubic metres (m3) in the summer months. Instead, natural gas got $30 more expensive. This news was announced by the Minister of Energy of Ukraine, Igor Nasalik. As ‘Naftogaz of Ukraine’ expected its prognosis to be true until the end of June, it totally refused buying Russian gas for filling up its underground gas stores (UGS). In the beginning of the heating season 2015-2016, the reserves of gas in the UGS were about 17 billion m3 and the warm winter allowed Ukraine not to buy additional quantities of gas from Gasprom. There are about 9.5 billion m3 in storage now and considering the reduced consumption, Ukraine could inject a total of 15 billion m3. However, in order to achieve this, someone must pay for those additional 5.5 billion m3, which need to be injected. In the beginning of May, the Ministry of Energy attempted to resolve the question of the necessity of buying additional quantities of gas, but Andrey Kobolev, the boss of ‘Naftogaz’ authoritatively stated: ”The biggest European analysts calculated that in June-July the price of natural gas will drop by $5.” Kobolev also said that he does not want to take the risk for the government losing 5 million dollars for each delivery of 1 billion m3. The price, however, did not align with the prognosis of the boss of ‘Naftogaz’ and in the spot market in the EU, the gas price was falling down up to April and after May, the price started to rise again and this tendency went on for the next two months. Unfortunately, the price ‘Naftogaz’ pays for natural gas to Europe is bound to the basic quote “spot”. For example, in Germany in the Gaspool zone, the gas is quoted at $162 m3 and in the beginning of May it was $151.5/1,000 m3. The price at the Austrian hub Baumgarten today is $172/1,000 m3 and in the beginning of May it was $165/1,000 m3. The difference of $30$ about which Nasalik speaks comes from the comparison of the minimum price for April with the maximum price for mid- July. This, however, does not stop Kiev from importing gas from Europe, although the price of the Russian gas is considerably more affordable. According to data from the analysts for the import of gas from Slovakia, the Ukrainians pay $180/1,000 m3 now, while the price of Gasprom is $167.5/1,000 m3. Apparently Ukraine, with an envious consistency, continues to lose money under the influence of its political moods. In the beginning, the West stimulated this policy but due to a lack of real evaluation from the side of Kiev, this created irritations. Foreign Policy wrote that Ukrainians are making a fatal mistake by exaggerating its geo-political importance for the Western partners. By observing the political misfortunes of the government and due to the lack of reforms, the West gradually lost its will to help Ukraine, the source stated. In summary, Foreign Policy wrote: ”Kiev is trying to point out that its biggest enemy is Moscow, but in fact, the problem of the Ukrainians is their talentless, corrupt leaders.” In order to make such a major mistake regarding the price of the natural gas one must be more than non-competent. For years, the price of the blue fuel followed the same formula. The price of natural gas falls and rises following the trend of the price of diesel – summed up for several months back in time. In this case, the price of diesel started to climb in January already. It turns out that ‘Naftogaz’ not only buys expensive gas from Slovakia, but it makes a special effort to choose the time when the price will be highest. According to the energy experts, such an event can only take place in serious corruption deals.

After becoming convinced in its totally inaccurate prognosis for the price of natural gas, the management of ‘Naftogaz’ focused on meteorological prognosis. Now the boss of ‘Naftogaz’, Andrey Kobolev, forecasts a warm winter for 2016-2017 and 14 billion m3 will be sufficient for resolving the problems of Ukraine for the winter season. In reality, for the winter period, Ukraine must inject a minimum of 17 billion m3 in its storage and an optimum of 19 billion m3 of natural gas. It is a fact that the reverse gas that comes from Slovakia to Ukraine contains to a great volume of Russian gas. More so, Gasprom does not exclude the option that the reverse gas is actually pseudo-reverse and part of the quantity contracted for Slovakia is delivered directly to Ukraine. In any case, Gasprom turns a blind eye to this blatant breach of contract because the Europeans, unlike the Ukrainians, regularly pay for the delivery of the purchased quantity. All these schemes, however, are not capable of securing the injection of even 15 billion m3 of natural gas in the Ukrainian gas storage before the beginning of the heating season. Marosh Shevchovich knows perfectly well what the store in the Ukrainian UGS should be so that Europe does not freeze, but obviously he cannot yet make a decision. The Ukrainian President, Poroshenko, and the Prime Minister, Groysman, distanced themselves from the gas problematics and left the matters for resolution at the lowest levels. As usual, Kiev bets on the help from Europe, but the European Commission does not have any intentions to pay for Ukraine’s gas and lobbies the IMF, the World Bank and the European Bank for the restoration and development of granting credit to Ukraine. In order to grant credit, these institutions expect Kiev to work on the approved plan for reforms, which clearly does not happen, so the contracted credit transfers remain under question. It will be too bad for the Europeans if the meteorological forecasts of the Ukrainian gas leader are as correct as his forecasts for the price of gas. If the autumn turns out to be cool, the gas reserves in the UGS will be consumed and the pressure in the pipes will not be sufficient to maintain the normal volume for the flow to Europe. Apart from that, in case the temperature in January and February 2017 is far below zero and the quantity of natural gas is under the minimal acceptable technological level, the flow might become impossible as the compressing stations will not be able to provide the pressure required for the flow. Although up to now, Ukraine has not received European credit for the gas, it will probably receive them because in this situation the West is a hostage of its own political engagements.

Author: Andrey Polunin

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  • George Washington

    Can we get an English translation for those of us who don’t speak Lizard-person?