Russia, Ukraine Argue Over Gas As EU Reports Shortage

MOSCOW, Russia -- Russian gas export monopoly Gazprom yesterday denied cutting supplies to cold-stricken Europe, pointing the finger at transit nation Ukraine, which in turn said it was taking only as much fuel as agreed in its contract with Moscow.

Gazprom’s deputy chief executive officer Alexander Medvedev said he was bewildered by reports of Russian gas supply cuts to Europe, adding the company had been cranking up exports.

Earlier this week, the European Commission said gas supplies into Italy via the Austrian border had been reduced by 10% from normal levels.

“Our company has increased gas supplies to European countries ... to the maximum in the middle of a harsh winter in Russia and Europe,” Medvedev, who heads Gazprom’s exporting arm, said in a statement.

He added Gazprom had been pumping gas to Europe at an equivalent annual pace of 180bn cubic metres (bcm) compared to the 150bcm it shipped last year.

Medvedev also said Ukraine, which tranships most of Gazprom’s gas bound for Europe and buys the fuel for its own needs, was taking Russian gas at a pace which was above contracted levels.

“Ukraine is currently taking gas at the annual pace of 60bcm, which is significantly above contracted levels,” Medvedev said.

Ukrainian state energy company Naftogaz quickly replied with a statement denying any contract violations.

“State energy firm Naftogaz guarantees that it will meet the schedule on natural gas supplies to European countries and domestic consumers,” Naftogaz said.

“The company also notes that the volume of gas transit through Ukraine’s territory and the offtake of imported gas are at levels set by the contract with Gazprom.”

Last month, Ukraine announced plans to cut imports of Russian gas – saying it is too expensive for its economy – to 27bcm this year from 40bcm in 2011 and to replace it with alternative energy sources such as coal.

Russia used to export around 80% of its gas to Europe through Ukraine before the launch of the 27.5bcm-a-year Nord Stream pipeline last November.

Moscow has accused Kiev of siphoning gas bound for Europe in the past, most recently in early 2009, when the two ex-Soviet nations were locked in a bitter dispute over supply prices.

Ukraine is also unhappy with the price of Russian gas it imports and has sought to renegotiate the price for over a year but the talks appear to have stalled.

It has, however, repeatedly pledged to honour the existing contract and to facilitate uninterrupted gas transit to Europe.

Meanwhile, the Energy Ministry said yesterday, oil output from Russia, the world’s biggest producer, hit a record high last month thanks to higher pumping rates at Rosneft and Gazprom.

Oil production growth in Russia, which is expected to flatten in coming years, again surprised analysts on the upside as it hit a post-Soviet record monthly high of 10.36mn barrels per day (bpd) in January.

This was up from 10.32mn bpd in December.

The previous monthly record in oil production of 10.34mn bpd was reached in November and October.

Overall daily natural gas production edged up to 2.04bn cubic metres (bcm) last month from 2.03 bcm in December, while gas production at Gazprom stood at 1.56 bcm a day in January comparing to 1.55 bcm in the previous month.

But even with growing volumes, a company source on Wednesday said Gazprom was struggling to meet rising gas demand in Europe amid a current deep cold snap.

Russia’s oil production remained ahead of 9.75mn bpd pumped last month by Saudi Arabia, which stands ready to boost production to offset an expected supply crunch on the back of a forthcoming EU embargo on Iranian oil.

According to the Energy Ministry, production at Rosneft’s Vankor field in East Siberia increased by 4.4% in January, month-on-month, to 330,000bpd, while Gazprom’s condensate output - an item, which falls into the crude oil production category – shot up 11% to 342,000bpd.

Source: Gulf Times