– Ukrainian gas transit system operator is geared up to receive as much as 6.6 bcm from Poland annually. And that does not require a new interconnector – says Olga Bielkova Corporate Affairs Director in Ukrainian GTS Operator OGTSUA.
BiznesAlert.com: What are the prospects of Polish-Ukrainian cooperation in the context of Nord Stream 2 project on one hand and gas markets integration on the other?
For now, we would need to quit imports from Russia through Ukraine to make physical flow to the East possible, right?
It is one of the ways. There are some limitations within the existing system which complicate the deliveries of gas from Poland to Ukraine via the existing system. USAID has recently commissioned a report to look at opportunities to further integrate gas market and transit infrastructure between our countries. One of the immediately implementable recommendation that the report highlighted was the opportunity for Poland to modernize and develop a small piece of pipeline inside its territory. It will make physical LNG supplies from Świnoujście to Ukraine possible. We are ready to import as much as 6.6 bcm annually but there is no possibility to get it now. Our current demand for gas in Ukraine is up to 30 bcm annually. We produce about 20 bcm. So we have to cover the shortfall of 10 bcm annually by importing gas from: Poland, Romania, Hungary, or Slovakia. The only country with firm capacity available now is Slovakia. Physical flow from Poland to Ukraine will help ensure access to the Ukrainian storage for the Polish traders and an opportunity for Ukraine to diversify our import routes. Otherwise, the synergy of connecting the LNG terminal in Świnoujście with the significant market demand in Ukraine will remain elusive. If there is no flow of gas through Ukraine to Poland, which seems likely under the current post-2022 scenario, a virtual reverse will be not possible because there will be no physical flow. Long term physical supplies is the best way to ensure market stability. Something that can’t be achieved via spot deals.
What about a Gas Interconnection Poland-Ukraine context?
At present, GTSOU is geared up to receive as much as 6.6 bcm from Poland annually. And that does not require a new interconnector. If we see a growing demand in Ukraine and new excess capacity in Poland, we would be more than happy to import more from Poland. Cooperation with Poland brings no political risks in contrast to other gas contracts Ukraine has been a part to prior to 2015. There are a few alternative sources of supplies from the European Union. Polish option is an obvious choice for us. It is clear that Ukraine will have to meet its demand for gas with imports from Europe, and we would welcome all and any steps to develop physical transit capacity from Poland to Ukraine to complement the firm capacity from Slovakia to Ukraine. At this point, we should leverage the existing infrastructure to move towards 6.6 bcm of gas flow from Poland to Ukraine. A new interconnector is not necessary yet.
What is the answer from Poland?
Our Polish colleagues have prioritized the Baltic Pipe, which we fully understand. Ukrainian market is a great opportunity to increase gas transit through Poland. LNG imports to Ukraine could be an interesting area to explore given the trends towards price convergence with the pipeline gas. In Poland, you already have the LNG infrastructure and in Ukraine we have the gas demand and storage. So the synergy here is readily apparent.
Poland and Ukraine share the history of gas supply interruptions, and it’s a small wonder that both of our countries take energy security and supply diversification very seriously. LNG by nature requires storage to address seasonality. Only in combination with gas storage can LNG infrastructure investments be fully leveraged. We created special taxation and custom regime for the foreign trades to access Ukrainian storage facilities and Polish companies are already using it.
The latest forecasts suggest that the gas demand in Poland could increase by as much as 50% in the coming decade. For us the more gas the merrier. Our capacity is 145 bcm annually. We are using about 40 bcm. In Ukraine, we have an abundance of transit and storage capacity which could be of value to Poland. There are no barriers or political risks for our cooperation. I praise Polish approach to include natural gas in energy transition plan. That is why LNG capacity in Poland could be further increased for our common good and facilitate the creation of a real Polish-Ukrainian gas hub. We could jointly reach out to LNG supplies from USA or Qatar to secure additional supplies. A consolidated Polish-Ukrainian market would be a win-win in terms of energy security and a negotiating position vis-à-vis LNG suppliers.
How this cooperation could be linked to Polish law on requirement of keeping the gas stockpiles for every company working on our market?
That is another reason to consider Ukraine for gas storage on advantageous terms. We are very flexible. USAID report shows the factual potential of this cooperation. We just need to use this opportunity. Ukraine introduced special customs for gas storage and flexible tariffs. As a member of the Ukrainian Parliament at the time, I was involved in the legislative initiatives which made this possible. It was clear to me that Ukraine would benefit from a stronger engagement of the Polish energy companies in our market, and offering concessions was a good way to accelerate our cooperation. The research by USAID shows some obstacles on Polish side but we can work together on practical solutions like licensing conditions for companies in Ukraine. There are some concerns of allowing Ukrainian companies into the Polish market. A solution could be a special license for those who are buying natural gas only for Ukrainian needs. We can help you to store strategic gas stockpiles in Ukraine. We are in talks with Towarowa Gielda Energii about access to storage capacities in our country, gas transport through Poland. We can discuss it together.
What is the potential of Polish-Ukrainian hydrogen cooperation?
As you probably know, Ukraine has a great potential in solar and wind. And the renewable energy could then be converted into hydrogen and shipped via our extensive transit network to Europe. This is why GTSOU is working to get our system ready for H2. At the first stage, it will be probably the mixture of hydrogen and methane. The blended gas can be delivered to the clients in Poland and onward to Germany via the Polish pipeline system. There could be quite synergetic for all parties – supporting Green transition within Poland and maintaining relevance of our transit infrastructure in the long term. I think it is the opportunity for both countries to take part in the European Green Deal.
Do you think that Poland and Ukraine could create an alternative to traditional gas supplies from the East to the West?
I actually think this is the right approach. We are neighbors. We have common history. We have the same competitors. Poland and Ukraine need to joint our efforts. The East-West gas transit paradigm is no longer our only option. With the Trans-Balkan gas corridor complemented with new LNG facilities across the Three Seas region, we could be looking at North-South/South-North gas flows. Further integration within the neighborhood will be a boost for everyone’s energy security. When LNG Terminals, pipelines and storage facilities are closely interconnected, it creates a win-win-win for all.
What happens after 2022?
2023 (laugh). I am hopeful that Poland and Ukraine will find a way to establish firm capacity next year. It is up to Poland how to use Ukrainian route. We will see about the future of Yamal contract with Gazprom. We will still have a transit contract with Gazprom until 2024. We are looking for common solution for reaching this momentum with Poland.
Interview by Wojciech Jakóbik