January 06, 2009

Gas Tussle

Sometimes it can be hard to get at the facts. And given that the western media went way down the wrong road on the recent Georgian crisis, one is inclined to be skeptical of coverage on the current Russia-Ukraine gas spat. Here is a nice summary of the facts by Reuters:

(Reuters) - A contract dispute between Russia and Ukraine has disrupted gas supplies to countries in the European Union, which gets about a fifth of its needs via pipelines through Ukraine.

WHY DID THE ROW START?

Russia and Ukraine failed to agree a new contract for gas supplies in 2009 before a New Year's Eve deadline set by Russian negotiators.

Russian gas export monopoly Gazprom said during the talks it wanted to raise the price it charged Kiev from $179.5 to $250. Kiev said it did not want to pay that, and made any price rise conditional on Gazprom paying more for pumping gas to Europe across Ukrainian territory.

WHY IS THERE LESS GAS GOING TO EUROPEAN CONSUMERS?

Gazprom cut off all gas for Ukraine's domestic use on New Year's day. This is not as simple as it sounds: Ukraine's gas, goes through the same network of pipelines as the gas intended for customers in Europe.

So what Russia did was to reduce the total volumes it was pumping by the amount Ukraine imports. That meant a reduction from the usual 400 million cubic meters a day to about 300 mcm/day.

What happened next is under dispute. Russia accused Ukraine of stealing gas intended for Europe, and using it for its own needs. On Monday, it cut gas supplies going through Ukraine further, by about one sixth. It said this was equivalent to the amount Kiev was siphoning off. On Tuesday, Gazprom accused Kiev of unilaterally shutting down at least three major export pipelines.

Ukraine has a different account of events. It denied siphoning off gas, saying only it had used some gas intended for export to maintain pressure in the pipeline network.

It accused Russia of deliberately halting exports, putting under threat supplies to Moldova, Bulgaria, Romania, Greece, Turkey, Poland, Hungary, Slovakia, Germany.

HOW DOES THE GAS GET ACROSS UKRAINE TO EUROPE?

Over 80 percent of Russia's gas exports to the European Union go via Ukraine.

There is a complex network of pipelines, but put simply there are two main routes. One goes West through Slovakia and from there to the Czech Republic, Austria, Germany, France, Italy and other countries.

The second goes south to the Balkans and south-eastern Europe -- the regions worst hit by the supply disruptions.

The Balkan pipeline is more vulnerable to the cuts of Russian supplies because there are no gas storage facilities at the inlet of the export route.

Pipelines running from Ukraine into Slovakia are linked to the huge underground gas storage facilities of Western Ukraine, therefore supplies are more secure.

In addition to these routes, there are separate pipelines from Ukraine to Hungary, Poland and Romania.

WHAT ABOUT OTHER GAS PIPELINES TO EUROPE?

Russia said it was compensating for reductions in exports to Europe by pumping gas through alternative routes. But it was not clear these routes had the capacity to cover the shortfall. These are the other routes:

YAMAL-EUROPE - Goes from Siberia via Belarus to Poland and Germany, Europe's biggest economy. Capacity 33 bcm/year or around 100 mcm per day. Gazprom has increased exports through Yamal to help compensate for lower flows through Ukraine.

BLUE STREAM - Goes from Russia along the bed of the Black Sea to Turkey. Capacity 16 bcm/year or around 50 mcm per day. Gazprom says it was also adding capacity through the Blue Stream pipeline.