Partial rejection of gas for rubles slows injection into EU's UGS facilities, but gas transit request via Ukraine little changed
MOSCOW. June 2 (Interfax) - Ukraine's Gas Transport System Operator (OGTSU) has accepted a request from Gazprom for Thursday to transport 41.8 million cubic meters of gas through the country, down from 41.2 mcm on Wednesday, data from OGTSU show. Capacity was requested only through one of two entry points into Ukraine's Gas Transport System, the Sudzha metering station. A request was not accepted through the Sokhranivka metering station.
"Gazprom is supplying Russian gas for transit through the territory of Ukraine at the volume confirmed by the Ukraine side via the Sudzha metering station at 41.81 million cubic meters on June 2, with no booking via the Sokhranivka metering station " Gazprom spokesman Sergei Kupriyanov told reporters.
OGTSU has declared a force majeure in regard to accepting gas for transit through Sokhranivka, citing the fact that it cannot control the Novopskov compressor station.
Gazprom believes there are no grounds for a force majeure or obstacles to continuing to operations as usual. Ukrainian specialists worked smoothly at the Sokhranivka and Novopskov stations all this time and continue to do so; transit through Sokhranivka was ensured in full, and there were and are no complaints from counterparties, the Russian gas giant has said.
EUROPEAN MARKET
The situation with renewable power generation in Europe remains distressing. Windless conditions throughout Europe are beginning to spread to neighboring energy sectors - diverting gas flows away from the strategic task of filling underground storage facilities.
Wind power contributed just 6.6% of electricity generation across the European Union in the three days of the new week, data from WindEurope show. The average was 19% last week. In the week ahead, the late spring cold is expected to finally give way to sunny, calm weather, which will lead to a drop in wind power generation and increased used of gas, along with higher power consumption for air conditioning.
Windless conditions and refusal by the latest buyers to receive gas under a new system of payments have disrupted the situation with gas injection into UGS facilities. On Monday and Tuesday, May 30 and 31, reserves were only up 0.29 percentage points, which is the lowest value for the month. The hardest hit was injection in Germany (up only 0.2 p.p.). Reserves now stand at 47.13%, data from Gas Infrastructure Europe show. Reserves in Europe's UGS currently lag 2.3 percentage points behind the five-year average.
The weather in Europe in May was four degrees warmer than it was a year earlier, which increases the region's ability to inject gas into storage. The pace of gas injection into UGS in May exceeded the five-year average by 29%, compared to just 12% in April. Europe imposed tight regulation of the use of UGS this year. Reserves are supposed to be at least 80% of UGS capacity by the start of the 2022 offtake season and increase to 90% in subsequent years.
As prices fell, Europe's LNG imports dropped somewhat in May to 349 mcm from the record high of April, when the European gas transport system took in 10.651 billion cubic meters or 355 mcm per day from LNG terminals. As of the last reporting date, May 30, use of regasification capacity at European terminals was at 65%, which is far from the peak of 77% at the end of April.
NEW PAYMENT SYSTEM
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.
Russia has already suspended gas supplies to Poland, Bulgaria, Finland, the Netherlands, Denmark and to some extent Germany because they refused to comply with the new payment system.