Gas Pipeline and effects to Ukraine

[OlgaH]

Shadow - surprised you agree Russia is not acting nice.  But I think both countries are at fault.  Longer Ukraine waits the cheaper gas gets as gas is coming down in price.  Why does Belarus pay less than EU and Ukraine for gas?

Since 2007 Gazprom has 50% of "Beltransgaz" .

Ukrainians can say big thank its own anti-Russia Government, who refused the price $250 for the gas. Read my posts above about Russia, Turkmenistan, Kazakhstan and Uzbekistan.

[kievstar]

Hi Olga, do not understand your post.  But it is always best in business to make process simple and cut out extra steps.  I like Russia with pipeline through sea to Germany and around Ukraine from those hard to spell former Russian countries to other EU countries. Eventually these countries should bypass Russia to and sell directly to customer but need the funding from Russia for pipeline I assume.

Not sure if most people know this but Ukraine requires the most documents and extra processes than most countries when it comes to business document requirements.  They make it more complicated each year.  Brazil is probably the next big country to be difficult to deal with on business document requirements.  Russia is very relaxed on business documents compared to Ukraine and Brazil.   So when it comes for Gazprom and Ukraine to settle the amount of paperwork required is going to be another debate.  Simple solution is gas contract should be adjusted every 3 month for price which Russia does not want.  But longterm Russia should not use Ukraine as those two countries really do not like each other.  Plus people starting to hate each other. 

[Simoni]

Simple solution is gas contract should be adjusted every 3 month for price which Russia does not want. 

But longterm Russia should not use Ukraine as those two countries really do not like each other.  Plus people starting to hate each other. 

That is correct.  Gas here is going for 60% less than it was this summer.  Would I like to pay $4 a gallon today? NO.  But Russia wants to squeeze people with out of date prices, prices that were out of line in the first place. I do hope Ukraine will convert to alternative energy, using their natural gas reserves instead of dirty oil and coal.  But then again, I hope the same for the US.

You are correct about the division between Russia and Ukraine.  When I started traveling to both eight years ago, Russians did look down at Ukrainians. They had no reason to do so, which made me like Ukraine better. At that time, I only heard good things about Russia from Ukrainians.  That has now changed.

 Russia did "mess up" as they tried to reign Ukraine back into their sphere with tough talk and aggression.  The result is just the opposite of what Russia sought.  Ukraine has learned not to trust Russia.

BTW-- Russia owes the USA for the technology and know how that allowed them to tap their fields.  RWDers like jb were there and helped make the fortune Russia is enjoying today possible...

[OlgaH]

But Russia wants to squeeze people with out of date prices, prices that were out of line in the first place.

 Russia did "mess up" ...

Russia, already the main gas-export destination for Uzbekistan, is particularly interested. Its state-owned energy giant Gazprom has reportedly agreed to pay over $300 per 1,000 cubic meters of Uzbek gas.
http://www.eurasiantransition.org/files/1e17cfc704b5c89a9fde4d80db2ca9d0-19.php

Turkmen gas costs $300 per 1,000 cu. m in the first quarter of 2009.
http://capital.trend.az/index.shtml?show=news&newsid=1386445&lang=ru

So $250 for Ukraine was not so bad but they rejected the price and has preferred to plot against Russia.

What so interesting the Belarus president Lukashenko doesn't have any negotiation problem with Russia and doesn't use Europe in the political intrigue but he also could as the Ukraine Government does.

"Against a backdrop of these events [Gazprom's negotiations with Ukraine], relations with Belarusian colleagues look quite good," Medvedev said.
http://www.istockanalyst.com/article/viewiStockNews/articleid/2917799

The Ukraine Government is blinded with its own intrigues, agendas and vendettas to see the very beneficial position they have being between Russia and Europe.

[kievstar]

Belarus pays less than $250 I think.  Belarus is really part of Russia. 

[OlgaH]

Ukraine’s refusal to let gas pass through its territory is now official, having been signed and sealed by the representatives of Gazprom, Ukraine’s Naftogaz and European observers. The document says that from January 13 2009 the gas flow monitoring station is in full working order. The monitoring devices at the Sudzha station in Russia’s Kursk region, bordering with Ukraine, show that the pressure is almost 70 bars, but Ukraine is still not accepting the gas transit

[youtube=425,350]7i982-MzKcc&feature=channel_page[/youtube]

[kievstar]

Did you watch the meeting with Germany and Putin today? per Putin.  Also, Putin would not talk about putting gas in transit pipes that did not make sense to Ukraine which Russia wanted.

Russian Prime Minister Vladimir Putin said on Friday he believed a deal could be reached soon with European firms to restart gas supplies to Europe cut off in mid-winter over a pricing dispute between Russia and Ukraine.

[BC]

STRASBOURG, France, Jan 14 (Reuters) - Technical gas should not serve as a pretext for cutting Russian gas supplies to the European Union via Ukraine, Mirek Topolanek, Czech prime minister and current EU president, said on Wednesday.

Ukrainian officials have said the country cannot bring Russian gas to the bloc because Russia is not pumping enough technical gas to Ukrainian pipelines.

"Very often technical gas is used as a pretext for not making deliveries. This must be stopped," Topolanek told the European Parliament. (Writing by Marcin Grajewski, editing by Dale Hudson)

http://uk.reuters.com/article/oilRpt/idUKBRM00009620090114

It's sort of like your garden hose.. If you have a spray nozzle on one end and turn on the tap, the nozzle will hiss and spit a while before water will spray..  that's pretty normal.. and represents what this 'technical gas' is supposed to prevent happening, keep enough pressure to allow that nozzle to spray correctly.

But if your hose has a bunch of holes in it (UA domestic consumption) and that same amount is not being replaced by UA to keep the pressure up, that nozzle on the EU side is just going to dribble and not spray like it needs to.

To me, it's pretty evident that UA can only fulfill it's transit commitments if RU also gives them for free a good part of their domestic consumption.  UA cannot or does not want to fully supply it's own market so cannot keep up the pressure for transit gas to reach it's proper destination.

[Shadow]

kievstar, look at the things Ukraine has done during this conflict from a business perspective.
Would you accept a business partner that does not pay bills, requests a discount while openly declaring your business as a bad influence and steals part of your goods ?

[Misha]

Would you accept a business partner that does not pay bills

This after being stuck with a usurious late payment fee.

requests a discount

Because the price of natural gas is on its way down.

while openly declaring your business as a bad influence and steals part of your goods ?

Allegedly stealing.

[Shadow]

This after being stuck with a usurious late payment fee.

Because the price of natural gas is on its way down.

Allegedly stealing.

If you know you must pay a big fee for paying late, why still do so and cry about it ?
Paying 50% of the current market price will save you even when it is goind down.
Courts will solve it, but if you know where the disappearing gas went, give Gazprom a call.

[Misha]

If you know you must pay a big fee for paying late, why still do so and cry about it ?

How do we know? We just have GAZPROM's and Russia's allegations.

Paying 50% of the current market price will save you even when it is goind down.
Courts will solve it, but if you know where the disappearing gas went, give Gazprom a call.

$250 is already higher than the market price for natural gas given the current price of oil.

[Shadow]

How do we know? We just have GAZPROM's and Russia's allegations.

On the contrary. The payment date is well known and was published by Ukraine.
Trying to wiggle out of things an turning them towards yourself is another bad business preactice.

So answer a simple question. Why does Russia only have trouble with Ukraine and not with any of the other FSU republics they deliver gas to, including Georgia ?

[BC]

How do we know? We just have GAZPROM's and Russia's allegations.

$250 is already higher than the market price for natural gas given the current price of oil.

That's what the monitors were all about.. Have the monitors said that RU has not opened the valve?  Last I heard Ukraine refused to open their valve and accept the 'shipment' for transit.  Now why would they refuse?.. the only reason I can think of is that they know that the gas will never make it to destination.

re prices:

Then why is Europe paying more.. even to their own western gas producers?  RU only provides 25% or so.. Where does the other 75% come from?  According to Putin the prices are regulated according to a formula that has been used for quite some time.. and that formula has not changed.

UA simply cannot afford to buy gas at market prices, cannot produce enough themselves to meet domestic demand which IIRC has the highest consumption of any EU country.  Even stranger if they opened the pipeline, without that one way valve on the EU side it would suck gas the wrong direction, into UA at the same time RU is pushing gas in from their side.

They do have a rather large amount of reserve bunkered gas probably filled with 'technical gas' that they are sitting on but won't use..  unless someone is willing to pay 'market prices' to them for it (a deal currently being worked on to supply other countries).  Yes, it is nice to get 'technical gas' for free, bunker it and then sell it to EU.. really nice but only possible under current crisis conditions.

KIEV, Jan 16 (Reuters) - Ukrainian President Viktor Yushchenko said on Friday the issue of renewing Russian gas supplies to Europe is linked to finalising a 2009 supply contract for Ukraine, contradicting his premier.

Prime Minister Yulia Tymoshenko said the two issues were not connected, ahead of Saturday's meeting with her Russian counterpart Vladimir Putin to get supplies moving to Europe.

Tymoshenko and Yushchenko have been at odds practically from the day she came to office at the end of December 2007 but appeared to have a united position during the row with Moscow since it cut all supplies to Ukraine on New Year's Day

http://www.reuters.com/article/marketsNews/idUSLG14412120090116

The right hand and left hand are not able to act in concert.. How should RU or even EU negotiate when the mat keeps getting swiped from under their feet by hands connected to the same body?

If UA can't make up its mind what they want then negotiations are pointless and futile.

[BC]

If you know you must pay a big fee for paying late, why still do so and cry about it ?
Paying 50% of the current market price will save you even when it is goind down.
Courts will solve it, but if you know where the disappearing gas went, give Gazprom a call.

Ukraine is not the only transit country.. Poland is another http://www.europolgaz.com.pl/english/gazociag_tarsa.htm

What is the difference between Poland and Ukraine?  If you figure that out, the real problem will be quite visible.

.. consider also Poland's position during the Georgian crisis AND their support of basing part of the US antimissile defense system in Poland AND Poland is a NATO country.. AND their transit pipeline is now running at over capacity....

[kievstar]

Hi Shadow, have you read the contracts?   Late payment fee of 480% was not in contract. Also, no payment terms in contract say pay 1st day of use. Russia assumes it is pay 1st day you use it. how many companies pay 1st day of use???  Also contract is very vague on technical gas.  A very poorly written contract according to the EU.  Contract was probably written on the back of a napkin when Putin was getting a lapper from Yulia.

Russia could have handled this in a better way with Ukraine and got EU involved.  But Russia likes attention. Turning off the gas was for many political and economic reasons for Russia.  Ukraine's behavior is just a bunch of idiots.  Russia does not have a banking crisis and Ukraine does.  Gazprom is going to have to do business without sending gas through Ukraine or give them Belarus price.

I would not do business with any company in Ukraine right now.

[kievstar]

Quote from Germany leader today in front of Putin.
"We are concentrating now on moving things forward," Merkel said. "It is certainly a complicated problem and I don't want to apportion any blame now. But is also seldom or hardly ever the case that only one side is always to blame."

Putin was not happy that Germay said both Ukraine and Russia are at fault and feels such a statement means EU is on Ukraine side.

[BC]

Hi Shadow, have you read the contracts?   Late payment fee of 480% was not in contract. Also, no payment terms in contract say pay 1st day of use. Russia assumes it is pay 1st day you use it. how many companies pay 1st day of use???  Also contract is very vague on technical gas.  A very poorly written contract according to the EU.  Contract was probably written on the back of a napkin when Putin was getting a lapper from Yulia.

kievstar,

A few posts above you pointed your finger and yelled 'conjecture'... 'alleged'.... and now complain?  These are signs of low ammunition, almost desperation..

Russia could have handled this in a better way with Ukraine and got EU involved.  But Russia likes attention. Turning off the gas was for many political and economic reasons for Russia.  Ukraine's behavior is just a bunch of idiots.  Russia does not have a banking crisis and Ukraine does.  Gazprom is going to have to do business without sending gas through Ukraine or give them Belarus price.

I would not do business with any company in Ukraine right now.

IIRC RU turned off gas for DOMESTIC UA use, not transit..  when transit shipments were not reaching destination because of the drop in pressure the whole system 'crashed' and valves were shut on all sides.

I was charged only once for a late fee.. think it was a cable company in the US that charged 25 bucks late fee for a 40 dollar month..  Multiply by billions? 

Folks paying late fees at banks, credit card firms, utilities etc will have no problem understanding..

I don't think though that the penalties assessed against UA were only late fees but also filled the 'gas gap' as to the question 'what happened to all that gas'..

[Shadow]

Hi Shadow, have you read the contracts?   Late payment fee of 480% was not in contract. Also, no payment terms in contract say pay 1st day of use. Russia assumes it is pay 1st day you use it. how many companies pay 1st day of use???  Also contract is very vague on technical gas.  A very poorly written contract according to the EU.  Contract was probably written on the back of a napkin when Putin was getting a lapper from Yulia.

Russia could have handled this in a better way with Ukraine and got EU involved.  But Russia likes attention. Turning off the gas was for many political and economic reasons for Russia.  Ukraine's behavior is just a bunch of idiots.  Russia does not have a banking crisis and Ukraine does.  Gazprom is going to have to do business without sending gas through Ukraine or give them Belarus price.

I would not do business with any company in Ukraine right now.

Have YOU read them ? If not then lets make it clear the Ukraine did pay late, and whatever the fees were did not want to pay them.
The contract is not vague at all, technical gas must be bought and paid for by Ukraine. When closing the gas supply to Ukraine, Russian increased the transit gas by the technical gas volume, then once the volume transited dropped below the expected supply minus technical gas decided to close the transit. Remember that there were monitors in place in Russia at that time who confirmed that the gas disappeared somewhere between the Russian and the EU border.

I agree that Ukraine handled the crisis like a bunch of idiots, and perhaps they should have involved the EU in a much earlier stage.

The reaction of Putin to the remarks made by Merkel was that while in a crisis seldom only one side is to blame, usually there is one side responsible, and to keep both sides on one level would be hardly justified.

[OlgaH]

Hi Shadow, have you read the contracts?   Late payment fee of 480% was not in contract.

Contract was probably written on the back of a napkin when Putin was getting a lapper from Yulia.

I join Shadow with the question "Did you read the contract?"

Honestly I did not expect from you you will debase yourself by gossips using it as a probable "argumentation"   

KIEV, Dec. 29
http://www.ukrainianjournal.com/index.php?w=article&id=7761

Ukraine owes almost $2.1 billion for Russian gas supplies in 2009, including $805 million for gas supplied in November, $862 million for gas supplied in December and $450 million fine, according to Gazprom.

KIEV, December 19 (RIA Novosti)

Ukraine earlier announced payment of an $800 million installment and said it planned to pay another $200 million of its gas debt to Moscow. "The payment of $1 billion for natural gas consumed in September and October has so far been made," Irina Vannikova said quoted by the agency.

[OlgaH]

06/29/2005

The Turkmen side stated that Ukraine fell short of providing goods and services timely as indicated in contract. Moreover, Ukraine reportedly was overcharging for goods delivered to Turkmenistan as a part of the barter deal. According to the contract signed at the meeting, Ukraine will make all the payments in cash, hence the barter deal has been completely cancelled. However, “Naftogaz” of Ukraine is obliged to deliver all the goods, worth $600 million, previously owed as a part of barter deals, by December 31, 2005. The total amount of gas supplies for the rest of 2005 and the year of 2006 is expected to amount up to $2 billion 134 million. http://www.centrasia.ru/newsA.php?st=1119297720


20.03.2006

Turkmenistan has doubts about Ukraine's solvency and threatens Ukraine to cut gas if Ukraine doesn't pay the debt $158,9 million...
http://www.centrasia.ru/newsA.php?st=1142839500

 

[GQBlues]

Wherever people's speculation is in this spat, one thing is for certain, it is affecting the trading market.

Natural gas is the single biggest ]futures Energy trade commodity.

http://www.nobletrading.com/blogs/2008/07/trading-energy-futures-contracts.html

Anytime there's a decline in supply, in this case, Russia shutting down the supply because of the drama with Ukraine, it actually raises the values of the natural gas futures contract, and also help in aiding the price of crude oil by holding off a wild buyout of cheap crude oil futures contract.

http://www.marketwatch.com/News/Story/oil-erases-losses-higher-stocks/story.aspx?guid=%7B1ECE818C%2DB3A5%2D477B%2D9036%2D5051DB9C284E%7D

http://www.bloomberg.com/apps/news?pid=20601072&sid=apuI2IUJG_wM&refer=energy

http://www.economicnews.ca/cepnews/wire/article/204263

Putin is trying pretty hard to combat a downed global economy. He has to as Russia gravely lacks an industry to help them soften the blows of a depreciated market for Crude Oil from it's peak prices of July 2008. Even after OPEC decided to cut supply to create demand, it didn't help the price of oil at all.

Something else has to happen.

EU is a huge market for Russia. While I've stated an admiration with Putin's bold move before, Putin also needs to be careful with what EU may ultimately counter considering western Europe is not only a potential partner to Russia's bid for modernization, but also a gateway to a unified nations of commerce.

He needs to find the perfect time to call it quit and let EU get some heat for a change.

[OlgaH]

He needs to find the perfect time to call it quit and let EU get some heat for a change.

The perfect time will be when Ukraine will carry out its obligations, open pipelines' valves and let Russian gas go to European consumers without any hindrance from Ukraine side.

[GQBlues]

The perfect time will be when Ukraine will carry out its obligations, open pipelines' valves and let Russian gas go to European consumers without any hindrance from Ukraine side.

I would like to think the minds behind Gazprom is much better than to readily lose huge EU revenues because of unpaid Ukraine bill, whose rates are at 50% off the market value. There's simply no financial justification in that. Penny wise pound foolish mentality simply have no place in the energy commodities market.  Not specially with a downed crude oil prices. That's a double whammo.

There's a bigger cause for the Europe freeze.

Even if a contract clause with Ukraine exist where Ukraine is liable for loss revenue, Gazprom knows they can never collect those monies form Ukraine, especially in its current economic state.

Unless of course, and wildly speculating, one can put a price on the value of Crimea. You never know... 

But I am inclined to believe this is a very calculated posturing by Gazprom by what I posted above. 

[OlgaH]

I would like to think the minds behind Gazprom is much better than to readily lose huge EU revenues because of unpaid Ukraine bill

lose huge EU revenues? You are dreaning! 

BTW Naftogaz Ukraini threatens turning off gas to the Ukraine capital Kiev because of "Kievenergo" debt to Naftogaz

http://gazeta.ua/index.php?id=277811&lang=ru