European natural gas traders are poised to lose over $1 billion in sales to Ukraine, once the country’s state-owned gas firm, Naftogaz, resumes gas imports from Russia’s Gazprom under their long-term contract valid until 2019.
Following the final award made by the Stockholm arbitration court last month, Naftogaz was ordered to resume purchases from Russia after a break of more than two years. The company claims to have successfully won a request to reduce its annual contract volume obligations by 10 times, to 5 billion cubic meter (Bcm).
Once shipments are restored, European traders, who filled the supply gap while a "no Russian imports policy" was in place, are expected to miss about $1.2 billion in sales opportunities, according to Bloomberg. The media firm assumed the 5 Bcm volume would be supplied at the average price Ukraine paid for imports last October, but didn’t disclose figures.
Kallanish Energy learns from Naftogaz the court decision resulted in a 27% drop in the price of gas contracted, from $485 per 1,000 cubic meters (cu m) to $352/1,000 cu m.
Kiev imported roughly 14 Bcm of gas from Europe last year through public tenders. Competition, which has been increasing in the past couple years, is now expected to intensify when Gazprom opens the taps to Ukraine.
“With Naftogaz potentially buying Russian gas in 2018 and 2019, ENGIE is enhancing its strategy of selling in Ukraine to final industrial customers, (a process) started last year,” an ENGIE spokesperson said.
Other suppliers are considering opening local units in Ukraine to deal directly with customers in the country, such as Swiss-based Axpo Trading AG. Polish energy firm PGNiG, which doubled its gas sales to Ukraine in 2017, said it’s willing to increase supplies through reverse flow. (See related story)