KYIV, March 1 – Gazprom on Thursday refused to begin natural gas supplies to Ukraine putting significant strain on the country’s gas infrastructure that has been already running at maximum capacity due to frigid weather.
The move comes a day after an arbitration court in Stockholm has awarded Naftogaz with $4.63 billion compensation following its 3.5-year gas transit dispute with Gazprom.
"We are surprised by the position of Gazprom,” Andriy Kobolev, the head of Naftogaz, said. “The bill was paid. We regard Gazprom's refusal to supply [gas] as a breach of the contract and failure to comply with the arbitration ruling."
The developments come at a time when the unusually cold weather over the past four days had forced Ukraine to steeply increase consumption of gas, mostly for heating.
Ukraine will be able to somewhat increase imports of European gas Thursday and Friday, but shortages will most likely hit the country on Saturday and Sunday, Kobolev warned.
“Saturday and Sunday is the risk zone that we are worried about,” Kobolev said. “We expect the shortages of about 10 million cu m/day of gas that we cannot compensate in any way.”
Ukraine will have to restrict consumption of gas during the weekend until the situation begins to improve on Monday, Kobolev said.
The shortages will come even as Naftogaz has stepped up purchases of European gas in the period, indicating the lack of throughput capacity to meet the growing demand.
He said European gas is currently more expensive than Russian gas would be, but the company plans to eventually bill Gazprom for the price difference following Gazprom’s refusal to start gas supplies.
Ukraine increased withdrawals of natural gas from its underground gas storage facilities to 115 million cu m/d on Wednesday, the maximum level possible, according to UkrTransGaz.
Ukraine had less than 10.1 Bcm of natural gas in its underground gas storage facilities as of February 28, according to UkrTransGaz.
In December the Stockholm court ruled that Naftogaz must be purchasing at least 4 Bcm/year of gas from Russia in 2018 and 2019 on a ‘take-or-pay’ basis. The court also ordered Gazprom to lower prices for gas by removing a correlation between gas prices and oil price in the formula.
Kobolev said the refusal to supply gas shows Gazprom is not a reliable partner and urged European companies to think twice before building new pipelines to increase dependence on the Russian gas imports.
"We also advise our European colleagues to think about whether it would be desirable to allow such a counteragent to increase its already significant influence on their markets through the construction of the North Stream 2 pipeline,” Kobolev said. (nr/ez)