Ukraine cuts tariffs in bid to incentivize gas storage filling: regulator

Ukraine's energy regulator has cut tariffs for gas storage services in a bid to create "favorable conditions" for building stocks to necessary levels ahead of next winter.

In a statement May 26, the National Commission for the Regulation of Energy and Utilities of Ukraine (NERC) said it had adopted a number of decisions related to the country's gas storage system.

"In preparation for the next heating season, and in order to create favorable conditions for the formation of reserves necessary for the stable passage of the winter period, the regulator reduced the tariff for gas storage services," it said.

The new tariffs take effect from June 1, it said.

The regulator also said that to stimulate long-term capacity bookings, it had introduced new discount coefficients that take into account annual capacity bookings.

"The adopted decisions form a new model of functioning of the gas storage operator and create the prerequisites for long-term planning of activities, maintaining the proper technical condition of the infrastructure and its further development," it said.

Storage target

Ukraine has Europe's biggest gas storage capacity at close to 31 billion cubic meters, but it remains underutilized amid the ongoing war with Russia.

In April, Ukrainian energy minister Denys Shmyhal said Ukraine planned to have accumulated some 14.6 Bcm of gas in storage ahead of the next heating season, though the forecast could change depending on the prevailing security situation.

Shmyhal said the "necessary minimum" stock level ahead of next winter would be 13.2 Bcm to enable Ukraine to manage winter demand in a stable manner.

"We understand that we continue to live in war conditions," he said, with Russian attacks continuing to target gas infrastructure.

"The next winter will take place under the same difficult circumstances as the current one. Therefore, given the situation, the forecast can be adjusted in accordance with the security situation," he said.

According to data compiled by S&P Global Energy CERA, total Ukrainian gas stocks totaled about 10.7 Bcm as of May 25.

Some 4-5 Bcm of the total is estimated to be cushion gas required for the sites' technical operation.

Storage data published by Gas Infrastructure Europe showed working Ukrainian gas stocks at 67 TWh (6.3 Bcm) as of May 25.

Gas imports

Ukraine has increasingly looked to imports to help meet demand and to refill stocks against the background of repeated Russian attacks on gas production sites, with Shmyhal saying April 9 that imports would again be a key metric over the summer.

He said the key tasks for preparing for next winter included timely contracting of imported gas supplies, injection of gas into storage during the period of "lowest market prices" and diversification of supply routes.

The preparations for restocking come after European gas prices surged following the start of attacks by the US and Israel against Iran Feb. 28.

Platts, part of S&P Global Energy, assessed the Dutch TTF month-ahead contract at a recent peak of Eur61.94/megawatt-hour on March 19, compared with Eur31.40/MWh on Feb. 27. The price was assessed at Eur47.28/MWh on May 26.