1 Jul 2022 14:37

EU wind generation could increase, Gazprom transit request via Ukraine - 42.1 mcm

MOSCOW. July 1 (Interfax) - Cloudy and cool weather has arrived in Europe, which could reduce shortages in the energy balance. Slightly stronger wind conditions will increase power generation from renewable sources.


Ukraine's Gas Transport System Operator (GTSOU) has accepted a request from Gazprom for Friday to transport 42.1 million cubic meters of gas through the country, after a request of 42.4 mcm on Thursday, data from GTSOU indicate.

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 42.1 million cubic meters on July 1, with booking via the Sokhranivka metering station declined," Gazprom spokesman Sergei Kupriyanov told reporters.

GTSOU 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.

Ukraine has suggested shifting transit volumes from Sohranivka to Sudzha, but Gazprom asserts that this is technologically impossible based on the Russian flow scheme. Also, the distribution of volumes is prescribed in the agreement on cooperation from December 30, 2019.

At the same time, the Ukrainian side insists that the payment should still be made on the basis of the estimated volume of transportation of the long-term contract stipulating 109 million cubic meters per day under the "pump or pay" rule. Gazprom, in turn, points out that Ukraine has reduced transit capacity by a third. Naftogaz Ukraine said it is now being underpaid for transit and is talking about appealing for arbitration.


After a hot start to the week, Europe has had several days of cooler cloudy weather and rain, reducing energy use for air conditioning.

Wind generation in Europe is declining day to day this week, accounting for 7.8% of the EU's energy mix, compared with an average of 10% last week, WindEurope data showed. A forecast increase in wind on Friday will allow European wind farms to boost generation.

Spot gas prices in Europe rose to $1,560/1,000 cubic meters amid a partial blockage of Nord Stream by Canada. Asian prices also reacted to the price hike in Europe - August futures on the JKM Platts spot index (Japan Korea Marker - reflects the spot market value of cargoes supplied to Japan, South Korea, China and Taiwan) rose to $1380.

Europe continues to pump gas into underground storage facilities. Stocks currently stand at about 57.92%, according to Gas Infrastructure Europe. The increase over the last 24 hours was 0.3 percentage points (the pumping rate may increase over the weekend as industrial demand declines). Europe's current storage levels are 1.75 p.p. behind the five-year average. In June, the gas injection rate is in line with the average for the last five years.

Beginning this year, the EU has imposed strict regulations on the use of underground storage facilities. By the start of the withdrawal season in 2022, stocks must total at least 80% of UGS capacity, and 90% thereafter.

European LNG receiving terminals in June are operating at an average of 63% of their capacity (61% on June 27) compared with a 65% average for May. For now, the region remains a premium market for LNG as prices in Asia are slightly behind European hubs. That could change soon, however, as China lifts its H1 Covid-19 quarantine restrictions, which could affect market capacity in the Asia-Pacific Region.