Slovakia ready to enable Ukraine role in boosting EU gas storage: PM Heger

Slovakia is ready to hold technical discussions with Ukraine so the country's natural gas storage capacity can be used to bolster European reserves, Slovakia's Prime Minister Eduard Heger said Oct. 22 following the EU Council summit in Brussels.

"Ukraine has a long term interest in working with energy solutions, including storage," Heger said on his Facebook page.

"As Slovakia, we are ready to discuss technical solutions with [Ukraine] because it would be appropriate for the future to provide increased gas reserves for the EU," he said.

The prime minister noted in a pre-summit press conference that Ukraine had considerable storage capacity of up to 30 Bcm, and Slovakia was ready to use its transit capabilities to help deliver stocks.

The Slovak leader also called on the EU to establish a minimum gas storage reserve in case of severe winter conditions.

Slovakia is one of the main transit countries for Russian gas supplies to Western Europe. It also has more limited reverse capacity for shipping gas in the opposite direction from Western Europe to Ukraine.

The country has been one of the main opponents of Russia's Nord Stream 2 gas pipeline to Germany, fearing it would reduce east-west volumes of Russian gas through its pipelines and undermine the earnings of its gas pipeline company Eustream.

Energy crisis

The European Commission is considering a number of proposals from member states on how to best handle the current energy-price crisis, including the potential for a joint initiative to procure emergency gas supplies and the creation of a strategic gas reserve, similar to that for oil.

It is considering revising the security of supply regulation to ensure better use and functioning of gas storage in Europe, with the possibility of setting up a strategic gas reserve (SGR) firmly on the agenda of the EU Council summit.

"The crisis has drawn attention to the importance of storage for the functioning of the EU gas market. The EU currently has storage capacity for more than 20% of its annual gas use, but not all member states have storage facilities and their use and obligations to maintain them vary," the EC said after unveiling a toolbox to tackle the crisis on Oct. 13.

Some analysts have argued that Europe's runaway gas prices have exposed a weakness in the market, due to the absence of storage obligations in some countries.

EU energy ministers are set to discuss surging power and gas prices at an emergency meeting on Oct. 26.

Ukrainian role

Speaking at the Ukraine Gas Investment Conference in Kiev in the week of Oct. 17, Sergii Pereloma, head of Ukrainian storage operator UkrTransGaz, said he thought a European SGR could be established as early as next year.

Pereloma voiced support for the SGR from UkrTransGaz assets, albeit not at the expense of domestic requirements, which he quantified at around 20 Bcm before offering a percentage to Europe.

Data from GTSOU showed Ukraine held a total of 18.631 Bcm in stock at the beginning of the Oct. 19 gas day, down some 9.7 Bcm year on year.

Pereloma said the behavior of non-resident gas storage capacity holders has changed this year compared to last year, when about 10 Bcm was held in stock by third parties from a total of 27 different countries, adding that in October last year, about 60% of the gas withdrawn by non-resident storage players was sold domestically, with 5% having been re-exported back into Europe.

According to data from the Ukranian Energy Exchange, November delivery was priced at UAH34,380/000 cu m Oct. 22, while the Dutch TTF November contract was equivalent to around UAH35,000/000 cu m.

Ukrainian is more traditionally at a premium to Europe, and a much larger locational arbitrage would be required to initiate re-export to Slovakia to cover the cost of transport, according to sources.