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Ukraine tenders for summer gas

The country is tendering for supplies worth up to $300m for delivery this summer

State-owned utility Naftogaz Ukrainy is tendering for gas supplies worth up to $300m for delivery this summer, for storage injection. The Kiev-based company said 10 August that it “intends using the proceeds of a proposed trade finance loan from the European Bank for Reconstruction and Development for a project to bridge the gap between the purchase and sale of natural gas.” The gas will have to be bought now but Naftogaz will not receive any money until it is sold, some time this winter.

Ukraine’s storage facilities are now a little less than half full, holding 13.5bn cm against potentially 32bn cm capacity. 

The tender calls for gas to be delivered at Ukraine’s interconnections with the European Union. At today’s prices, $300m would bring in a little over 1bn cm. The gas will only be used for Ukrainian customers, as the company is no longer obliged by Gazprom to keep any gas in store to offset any potential failure of Russian gas supplies westward.

Ukraine has not been able to agree terms for the supply of Russian gas since the end of the second quarter of this year, when the gas stopped flowing. Last year it managed to secure a winter delivery package, with the help of the European Commission, so long as it paid in advance each month.

Trilateral talks between Kiev, Moscow and the European Union are due to take place by early September, with the aim of reaching an agreement that will ensure regular flows of gas to Ukraine over the winter. The European Commission wants an agreement, to allay market fears of a price spike in the high-demand period. But since the end of the winter contract, relations between Kiev and Moscow have deteriorated still further.

Naftogaz said contracts that were to be financed with the EBRD loan would be based on the standard procurement procedures and practices applied to the procurement of gas in the European Union and would be open to firms from any country.

Contractually the gas will be sold by European Union-based companies but Russia will most likely be the source of much of it, as it is the biggest physical supplier of gas in central and eastern Europe and new pipeline interconnections and reverse flow capability allow gas to flow eastwards to Ukraine from Austria, Slovakia, Poland and Hungary, for example.

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