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Insight Conversation: Steve Cunningham, geo

Ukraine looks to boost gas stocks ahead of next winter as Gazprom talks loom

Kiev — Ukrainian and European traders are accumulating additional reserves of natural gas ahead of next winter to prepare for any potential supply disruptions amid a looming stand-off with Russia.

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Andriy Kobolev, head of state energy company Naftogaz Ukrayiny, said Ukraine will accumulate 20 Bcm of gas ahead of next winter, up from the 17 Bcm it usually has in underground storage facilities for the start of the heating season.

"It is important to have heat in Ukrainian homes even if Gazprom is going to trigger another crisis," Kobolev said Thursday. "European traders are also creating additional reserves."

Kobolev's comments come days after Russian President Vladimir Putin commented in Beijing on the unwelcome scenario for Ukraine should Naftogaz and Gazprom fail to sign a new gas transit agreement.

The companies' current 10-year agreement expires at the end the year, with a new deal not signed. The next round of negotiations between Ukraine and Russia is scheduled for later this month, and will be joined by the European Commission, which has expressed concerns about slow pace of talks.

Ukraine is a key supply route for Russian natural gas to Europe, delivering about 25% of Europe's total annual gas needs. However, Russia is building a number of gas pipelines, including Nord Stream-2, which will bypass Ukraine on the way to Europe.

"This is artillery before the next trilateral talks in May," Kobolev said of Putin's comments. "Moscow kicked off the talks on gas transit, and this round of talks was held by the Russian president from far away in Beijing."

Ukraine is seeking to secure least 60 Bcm/year of Russian natural gas to Europe for the next 10 years, while another 30 Bcm/year will be available to Gazprom, or other companies, on short-term contracts.

Gazprom's conditions for successful talks, including canceling billions of dollars in payments it must make following a court ruling in Stockholm.

Also, Gazprom and Naftogaz are at odds over which standards to apply in negotiating and signing the transit agreement.

Kobolev said Ukraine was able to import gas from Europe at competitive prices, and that European traders should start buying Russian gas on the Ukrainian-Russian border to ensure safe shipments of gas across Ukraine to Europe.

"This would allow to move points of sale for gas to our eastern border, in other words to offer gas shipment capacity of our gas transportation system to other traders, for example to European customers of Gazprom," Kobolev said, adding that the Russians will try to avoiding that scenario.

Ukraine increased transit of natural gas through its gas transmission system by 5.6% on year to 29.26 Bcm from January-April, according to UkrTransGaz.

-- Alexander Bor,

-- Edited by Dan Lalor,