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30 January, 2019

Ukrainian natural gas exported to Europe for first time in fifteen years

Ukraine has restarted exports of its own natural gas to Europe after fifteen years, exporting a relatively small amount to Slovakia, seemingly to demonstrate to the Ukrainian gas sector how easily it can be done

Early on Jan. 30, privately-owned TAS Energia Krainy said it had become the first Ukrainian energy company in fifteen years to complete a transfer of Ukrainian natural gas to Europe or the European Union.

The company exported just 5,000 cubic meters, basically the minimum viable amount for a transfer, through the Budince entry-exit natural gas transmission point with Slovakia.

The gas was then purchased on European energy markets by the UK-registered company Metalex Limited.

Gennadiy Kobal, director of the Kyiv-based, energy consulting company ExPro Gas and Oil, told the Kyiv Post that his company consulted with TAS Energia on the transfer, that was largely an experiment and a stress-test for the Ukrainian transfer system.

Companies needed to test the readiness of the country’s state-owned Ukrtransgaz gas transportation system, especially the cross-border element and new customs regimes that are now in place with the EU.

“It was an experiment with the process,” he said. “It was easy to organize – simple,” he added.

“This is the first step on the way to integration of Ukraine into the EU energy community,” said Maksim Dmytruk, general director of TAS Energia.

“Companies should now try testing gas exports to Europe in other directions…through Poland, Hungary and Romania,” said Kobal.

Kobal said that lots of Ukrainian energy companies pump natural gas into underground storage and keep it until the winter before selling it on the Ukrainian energy market. Instead, they should now consider exporting it to Europe instead, especially if prices are higher, making Ukrainian gas exports more competitive.

Gas exports to Europe have become more feasible, according to ExPro analysts, especially since the Jan. 1 lowering of tariffs on the entry-exit gas transmission point for Ukraine’s gas transportation system, or GTS.

At the start of this year, tariffs on entry into Ukraine’s GTS were halved, from $12.47 per thousand cubic meters per day to $6.28, making European-Ukrainian gas trade much more viable.

But Ukraine, despite having about 1 trillion cubic meters of gas reserves still under the ground, not to mention unexplored offshore reserves that are widely believed to be vast, has a way to go before it can become a major exporter.

National production, now at 21 billion cubic meters per year, hasn’t grown much in recent years while national consumption has risen to about 33 billion cubic meters annually.

But TAS Energia and ExPro say that the country’s first ever gas export to Europe is still a major breakthrough and represents Ukraine being able to start diversifying its role in European energy markets.

A long-time conveyor of Russian natural gas to the EU and importer of gas from Europe, Ukraine can soon become an independent exporter itself, they say.

“It’s not just a question of the resources we have in the ground,” said Kobal. “It’s also about issuing (exploration and extraction) licenses, having the right technology and investment.”

Kyiv Post

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