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Gazprom Says ‘Perplexed’ by EU Supply Drop as Ukraine Takes Gas

OAO Gazprom is “perplexed” by reports of a decline in Russian natural-gas supplies to Europe, said Deputy Chief Executive Officer Alexander Medvedev, adding Ukraine is taking more fuel than contracted during a cold snap.

Gazprom, Russia’s gas exporter, is boosting gas supplies to the “maximum” to Europe, Ukraine and Belarus as the freezing weather raises demand, Medvedev said today in an e-mailed statement, after Austria, Poland and the Czech Republic reported imports had fallen.

“Amid the freezing winter in Russia and Europe, our company has boosted gas supplies to the maximum,” Medvedev said. “Offtake of gas from European storage has quadrupled in the past week.”

The European Union relies on Gazprom for about a quarter of its gas, with as much as 80 percent of Russian shipments crossing Ukraine. Disputes between the two countries over gas prices and transport costs have disrupted winter supplies to Europe twice since 2006. Tension escalated this year as Ukraine, Gazprom’s biggest gas customer by contracted volumes, sought to renegotiate its agreements with Russia.

‘Sitting on Transit’

OMV AG, central Europe’s biggest oil company, said today its natural-gas hub in Baumgarten, Austria, is getting 30 percent less gas than yesterday from Russia. Polskie Gornictwo Naftowe i Gazownictwo SA, Poland’s dominant gas company, said imported Russian gas supplies have been cut by about 7 percent effective today. This week’s freezing weather is the deepest cold snap since December 2010, according to High Wycombe, England-based British Weather Services.

“Sitting on transit pipelines, Ukraine is taking gas at an annual rate of 60 billion cubic meters, which is significantly higher than contracted volumes,” Medvedev said in the statement. The exporter didn’t provide current transit volumes via Ukraine.

NAK Naftogaz Ukrainy, Ukraine’s state-run energy company, said it is guaranteeing gas transit to Europe and supplying local consumers from storage. Imports and transit are in compliance with the contracts with Gazprom, Naftogaz said today in a statement.

No Shortages

The eastern European country has asked Gazprom to lower contracted volumes by about 48 percent this year or cut prices, saying the supply agreement hurts its economy. Gazprom has rejected the plan. In 2009, the Moscow-based gas company agreed on a 10-year supply contract to end the interruptions in deliveries. The deal obliged Ukraine and Russia to agree in writing on revisions at least six months before the start of the year, according to Gazprom.

“We don’t anticipate any actual shortages to be experienced in Europe,” Ronald Smith and Alexander Bespalov, analysts at Citigroup Inc. in Moscow, said in a note yesterday.

Cold weather in Europe hasn’t created a supply shortage as stocks are full after a mild winter up until now, Jean-Francois Cirelli, vice chairman and president of GDF Suez SA, Europe’s largest utility by market value, said yesterday.

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