Gazprom Shifts EU Gas Supply Away From Ukraine Amid Dispute

OAO Gazprom (GAZP), Russia’s state-run gas exporter and producer, began rerouting some supplies to Europe through the Nord Stream pipeline and another across Belarus as it tries to end reliance on Ukraine after disputes over prices.

“We are at the start of a big move to redistribute gas transit volumes from Ukraine to our Beltransgas unit and new undersea pipelines,” Sergei Kupriyanov, a Gazprom spokesman, said today in an e-mailed statement.

Gazprom, the world’s biggest gas producer, is acting on a pledge to halt dependence on Ukraine to deliver the fuel to the European Union, where Russia is the biggest single supplier. Arguments over the cost of gas sold to Ukraine led to periodic halts in supply to Europe during the past six years.

Ukraine, which has typically carried as much as 80 percent of Russian gas westwards, so far failed to win an agreement in negotiations over price cuts it’s seeking from Gazprom.

The Russian company accused Ukraine of siphoning off gas destined for Europe during a cold snap last month after the Moscow-based exporter failed to fully meet demand for increased volumes from EU buyers. Ukraine’s state-run energy company NAK Naftogaz Ukrainy has denied the allegation.

Taking Control

Russian gas transited through Ukraine has fallen by half because of weakening European demand, Vadym Chuprun, Naftogaz’s deputy chief executive officer, said today. Daily flows fell by about 180 million cubic meters on March 28 and as much 200 million cubic meters by late yesterday, Chuprun told reporters today in Kiev. Ukraine’s state energy company had planned to ship 400 million cubic meters of Russian gas, he said.

Gazprom last year gained control of Belarusian national gas pipeline operator Beltransgaz, which served as a lesser route for Russian gas flows to Europe. Since last year, Russian gas has also flowed to Germany directly under the Baltic Sea through the Nord Stream pipeline, which Gazprom plans to expand.

Russian President Dmitry Medvedev urged Gazprom to build the South Stream pipeline through the Black Sea to the EU, starting this December. The link will be the second direct gas supply route from Russia, bypassing Ukraine and Belarus.

To contact the reporters on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net; Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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