Ukraine Starts Talks With Slovakia for Importing Gas From EU

Ukraine began talks to import natural gas from the European Union, in an effort to decrease reliance on supplies from Russia after that neighbor annexed Crimea.

Representatives from Ukrtransgas AC and Eustream AS, the Ukrainian and Slovakian pipeline operators, met with European Commission officials in Brussels yesterday to discuss technical aspects of trying to reverse the flow of gas through Slovakia’s pipeline, EC spokeswoman Sabine Berger and Eustream spokesman Vahram Chuguryan said.

Ukraine currently exports the fuel to Slovakia. It depends on Russian gas provider OAO Gazprom to meet more than half of its overall demand, with the rest covered by domestic production. EU Energy Commissioner Guenther Oettinger said last week he expected a memorandum between Ukraine and Slovakia to be signed before the end of April.

The interim Ukrainian government headed by Prime Minister Arseniy Yatsenyuk is seeking to diversify the country’s dependence on natural gas imports from Russia, which cut the 33 percent price discount it had previously given its neighbor. Russia also has threatened to reduce supply as tensions deepen between the two countries over Crimea and the troop buildup along Ukraine’s eastern border.

“It was a constructive meeting with the objective to accelerate the installation of physical reverse flow at the Slovakian-Ukrainian border,” Berger said in e-mailed message. “Some further technical work is needed which will be carried out during the next two to three weeks.”

Crimea Annexation

Russia’s annexation of Crimea and influx of troops in the area brought its relationship with the EU and the U.S. to the lowest point since the Cold War. The world’s top industrial powers threatened further sanctions to deter President Vladimir Putin from taking over other parts of Ukraine and suspended Russia from participating in the Group of Eight.

Ukraine has the capacity to import as much as 12 billion cubic meters of gas through the Slovak pipeline and further 7.2 billion cubic meters from Poland and Hungary, Ukrainian Energy Minister Yuri Prodan said yesterday. The price of EU gas would be about $400 per 1,000 cubic meters, he said yesterday in Kiev.

The country has 7 billion to 8 billion cubic meters of gas in storage and its oil product reserves will last less than a month. The state-owned gas company Naftogaz will raise gas prices for households by 50 percent from May 1, Chief Executive Officer Andriy Kobolyev said today in Kiev.

A Snapshot of Ukraine's Past and Future

Ukraine, which has a $1 billion bond maturing in June, is nearing an agreement with the International Monetary Fund for a loan of as much as $20 billion. One of the IMF’s conditions is that the country phases out subsidies that keep household gas prices below market levels.

To contact the reporter on this story: Ladka Bauerova in Prague at lbauerova@bloomberg.net

To contact the editors responsible for this story: Timothy Coulter at tcoulter@bloomberg.net Todd White, Randall Hackley

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