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Highlights

GTSOU welcomes additional capacity offer at Velke Kapusany

Network receives consent from regulator for capacity transfer

Supportive of 'long term, structural solutions,' extended offer

Ukraine's natural gas transmission system operator GTSOU said July 2 its Slovakian counterpart should "find a solution based on European rules" to a dispute over planned maintenance.

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GTSOU said late June it would be carry out works downstream from the Budince interconnection with Slovakia from August 11, which would entail a full stoppage in gas transport potentially lasting until October 1.

With exports from Slovakia likely to be compromised should a resolution not be reached, the status quo could be detrimental to traders -- many of whom have already purchased gas contracts and capacity in Slovakia to ship to Ukrainian storage -- unless the Slovakian side takes action.

"Should the Slovak regulator URSO not support the idea of introducing EU network code and create a single virtual point, another solution could be applied to minimize the losses of traders," GTSOU said.

The network operator went to describe how this solution to the problem, suggested to the Slovakian TSO Eustream by GTSOU previously, has been authorized by its national regulator.

GTSOU said it welcomed Eustream's decision on June 29 to offer an additional 60 million cu m/d of virtual reverse flow capacity at the Velke Kapusany interconnection between the two countries, which only physically flows from Ukraine to Slovakia, until October 1.

"It will guarantee that all interested companies will be able to timely deliver the planned volumes of gas from Slovakia to Ukraine for storage in Ukrainian underground facilities in August-September," GTSOU said, adding: "We believe it is possible to offer the market intermittent capacity of up to 110 million cu m/d, which corresponds to the volume of gas transportation through this point."

"It also makes sense to extend the duration of such an offer, allowing traders to plan their transactions in the longer term at better costs."

In reiterating its desire to form a virtual interconnection point between the two countries, whereby Budince and Velke Kapusany would be amalgamated for the purposes of shipper capacity purchases and scheduled flows against these, GTSOU took the opportunity to reinforce its compliance with EU network code.

"We support long-term structural solutions in accordance with European network codes, which are based on a single Virtual Interconnection Point creation, and introduction of a standard capacity allocation mechanism based on auction principle," it said.

In the past, GTSOU has criticized Eustream's 'first-come-first-served' policy towards capacity sales adjacent to third countries for being 'non-transparent' and not in the spirit of Europe's Energy Union.

GTSOU said Europe's Energy Community, of which it is a third-country member, has repeatedly emphasized the need for a common rulebook, quoting Energy Community president Janez Kopac who said it was for "the benefit of system security, security of supply, market functioning, and above all energy consumers"/

"We are convinced that the market and both TSO's will benefit from these more predictable rules based on the implementation of standard European network codes and regulations," GTSOU said.

Eustream has previously dismissed GTSOU's proposals as "not feasible".

Quick and dirty

GTSOU also published more extensive details about the rationale for its maintenance plans. "The need to repair the gas pipeline used for import through Budince is vital because of the need to prepare the GTS for the next heating system," it said.

"This particular gas pipeline was a temporary 'quick and dirty' solution that was built in 2014 to ensure the possibility of physical reverse gas flow from Slovakia."

GTSOU also said how the former long-term transit agreement between former TSO owner Naftogaz and Russian Gazprom, concluded in December 2019, had "entirely prohibited the option of using the more powerful transit infrastructure of Uzhgorod/Velke Kapusany. That is why we rarely heard about any of its maintenance in years."

"Unfortunately, unlike the rest of the Ukrainian pipelines, [the part of Budince pipeline from the 1970s] does not have reserve capacity, so its repair requires a full stop or significant reduction of the transportation."

Referencing Russia and Ukraine's latest transit accord, which permits 65 Bcm of flow in 2020 and 40 Bcm of flow in 2021 across all points, GTSOU said the works will be necessary to enable greater utilization of existing infrastructure for future imports.

"It should be noted that currently, the level of utilization of Uzhgorod/Velke Kapusany does not exceed 40%...it will continue to decrease, allowing the TSOs in Slovakia and Ukraine to develop options for the use of two of the four large-diameter pipes for uninterrupted and firm import to Ukraine, instead of the temporary solution at Budince."