EU ups gas purchases from Gazprom despite Poland's rejection of Russian supplies; wind power falls further
MOSCOW. April 27 (Interfax) - Requests to pump Russian gas to Europe through Ukraine increased on Thursday, despite Poland's essential rejection of direct Russian gas supplies.
Poland has decided to get its gas from Germany, but this gas on the German market has to come from somewhere.
The nomination for pumping Russian gas to the region for April 27 was revised upward to 64.8 mcm from 49.8 million cubic meters, and the nomination for April 28 is 63.4 mcm, data from Ukraine's Gas Transport System Operator show.
Having refused to comply with the new form of payment for Russian gas, Poland has essentially foregone further gas supplies from Gazprom , which stopped on the morning of April 27. Instead, Polish importers increased gas offtake from Germany.
The reverse flow of gas from Germany to Poland through the Yamal-Europe gas pipeline rose to 1.3 mcm per hour on Thursday, data from gas transport operator Gascade show. In annual terms, this comes to 10 bcm, which is the annual amount of Poland's contract with Russia.
The decisions of Poland and Bulgaria to trigger the suspension of Russian gas supplies pushed up prices in Europe. Day-ahead contracts on the TTF hub rose to $1,150 per 1,000 cubic meters. Countries that give up gas supplies from the East will push up prices on the European spot market, so gas prices will go up for all buyers.
The situation with renewable power generation in Europe has deteriorated further. Wind power contributed an average of 17% of electricity generation across the European Union in the week from April 18 to 24, but the figure dropped to 7.2% on Wednesday, data from WindEurope show. This is the lowest figure since last September. Calm weather is expected to continue in Europe at least until the end of next week, so the situation is unlikely to improve.
Europe has opened the season of gas injection into underground gas storage facilities, in which reserves now amount to 32%, up by 0.2 percentage points from a day earlier. Current reserves in underground gas storage in Europe are 6.4 percentage points lower than the five-year average. Poland's and Bulgaria's refusal to buy Russian gas will increase the shortage on the market and further slow the pace of injection into storage.
President Vladimir Putin signed a decree (No. 172) on March 31 on a "special procedure for foreign buyers' fulfilment of obligations to Russian suppliers of natural gas," under which payment for Russian pipeline gas supplied after April 1 to foreign counterparties specified in the decree must be made only in rubles.
Under this procedure, special "K" type ruble and foreign currency accounts are opened at the authorized financial institution, Gazprombank (GPB) , for foreign buyers. These accounts prohibit the suspension of transactions, freezing or debit of funds as part of foreign buyer's fulfillment of obligations that are not related to payment on contracts to supply natural gas. Foreign buyers pay for gas in the currency of the contract, which the bank then sells on the Moscow Exchange and transfers rubles to Gazprom . This is the point at which payment for the gas is considered to be completed.
If this condition is not met, gas supplies will be suspended. Further gas supplies are prohibited if the payment deadline for gas supplied under a contract has expired but the foreign buyer did not make the payment or made it in foreign currency, not in the full amount or not to the account at the authorized bank.