Ukraine’s Gas Balance Still Tight After Deal with Russia, Says New Report

Ukraine’s supply-demand balance remains tight, despite the recent deal brokered by European authorities, writes Wood Mackenzie on Wednesday.

The consultancy group reported that Kiev could run into problems in the event of a cold winter. The 4 bcm of gas from Russia - which is one of the pillar of the deal signed in October - would allow the country to keep an equal sum of gas in its Underground Storage Facilities.    

‘For Ukraine this 4 bcm of Russian imports eases concerns about meeting its winter gas demand, but it is no panacea - Ukraine's winter (October to March) gas balance is still tight. We estimate that Ukraine winter demand will be 31 bcm under normal weather conditions, a level similar to last winter's demand. Domestic supply will be 10 bcm and we expect imports through the new Slovakia-Ukraine pipeline to continue to run at full capacity through the winter and provide 4.5 bcm of gas,’ reads the press release.  

Wood Mackenzie estimates that Ukraine’s gas consumption might remain on the level registered last year, despite Kiev is trying to push demand down, through a mix of awareness campaigns and price hikes.  

According to Wood Mackenzie’s calculation, a cold winter would leave Ukraine with less than 4 bcm. This would push Kiev to work on a deal with Russia in the coming months.

‘Ukraine will require a new deal with Russia to ensure sufficient deliveries through summer 2015 to replenish storage stocks to meet demand for winter 2015/16.’ 

This might soon translate into serious problems, as diplomatic ties between Kiev and Moscow remain wobbly. The international chessboard equally resembles a minefield.  

‘Prime Minister Abbott noted that all leaders of the democratic world have unambiguously demonstrated support of Ukraine and its territorial integrity in the course of the Summit. He emphasized that Ukraine was fighting for freedom and democracy and the whole civilized world supported Ukraine in that struggle,’ the office of Ukraine’s Petro Poroshenko wrote on Wednesday.

“We won’t engage in direct negotiations with the Russian terrorists. To guarantee peace it is required a format which is acceptable to the entire world and, first of all, to Ukraine", Prime Minister of Ukraine Arseniy Yatsenyuk added at a Government meeting a few hours later.