Ukraine Seeks More EU Gas Imports as Russia Demands Billions

Ukraine is seeking to import more natural gas from Europe via Slovakia as Russia demands an extra $11.4 billion for contracted fuel and clashes with pro-Russian forces in the countrys east escalate.

The European Union, Slovakia and Ukraine failed today to agree on flows from the west, aimed at reducing Kievs dependence on Russian gas, as officials met in Bratislava, Slovakia. EU Energy Commissioner Guenther Oettinger said an accord to supply substantial volumes to Ukraine would require Russian consent. With current proposals, European supplies could replace less than half the imports from Moscow-based OAO Gazprom (GAZP) this year, according to data compiled by Bloomberg.

Slovakia is going to want some sort of guarantee that it will get paid, Julian Lee, a senior energy analyst at the Centre for Global Energy Studies in London, said today. The problem is in part because Ukraine is unable to pay for its gas delivered from Gazprom, and any other supplier is going to want to make sure they dont end up in the same position.

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Ukraine and Slovakia have so far been unable to agree on terms and volumes of flows from Europe. The EU and the U.S. are jointly seeking alternative supply sources to Ukraine, including reversing pipelines amid the worst standoff between Moscow and the West since the Cold War, spurred by the new Kiev governments plans for closer ties with the EU.

Slovakia, a transit country for the fuel, pumped more than 50 billion cubic meters from Gazprom through its pipelines to European nations last year, or about a third of the worlds biggest gas exporters sales to the region, according to data from Eustream AS, the Slovakian pipeline operator, and Gazproms export unit. That compares with 5.4 billion cubic meters Slovakia imported for its own needs, according to Gazprom.

There is a commercial problem in the sense that Gazprom is obviously a very large client for Eustream, and obviously it is not in Gazproms commercial interests for reverse flows deliveries to start, Simon Pirani, a senior research fellow at the Oxford Institute for Energy Studies, said yesterday.

Slovakia cant commit to supplying Ukraine more than 10 billion cubic meters a year via an existing idle pipeline, Slovak Economy Minister Tomas Malatinsky told reporters. Ukraine is proposing more audacious solutions, which Slovakia cant accept because they may harm contractual relations with Gazprom, he said.

A Snapshot of Ukraine's Past and Future

Russia shipped 25.8 billion cubic meters of gas to Ukraine last year, including supplies to state-owned NAK Naftogaz Ukrainy, or about 71 million cubic meters per day, meeting half of the nations demand, according to data from Gazprom.

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Ukraine Seeks More EU Gas Imports as Russia Demands Billions

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