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Slovakia faces gas supplies halved

A FIFTY-percent drop in Russian natural gas deliveries on October 1 put the government on alert with Prime Minister Robert Fico comforting Slovak households and the corporate sector that undisrupted and smooth supplies of gas to cover their consumption is still guaranteed. In mid-September supplies of Russian gas via Ukraine dropped by 10 to 20 percent with Russian gas giant Gazprom citing technical issues behind the drop leaving observers who see a political message unconvinced.

A FIFTY-percent drop in Russian natural gas deliveries on October 1 put the government on alert with Prime Minister Robert Fico comforting Slovak households and the corporate sector that undisrupted and smooth supplies of gas to cover their consumption is still guaranteed. In mid-September supplies of Russian gas via Ukraine dropped by 10 to 20 percent with Russian gas giant Gazprom citing technical issues behind the drop leaving observers who see a political message unconvinced.

Slovakia’s gas utility Slovenský Plynárenský Priemysel (SPP) reported an approximately 50-percent drop in gas supplies and instantly purchased extra gas on the spot market to cover the daily consumption of its clients as well as fill the gas reservoirs, the TASR newswire reported.

Cuts in gas supplies continued also on October 2, this time as deep as 51.5 percent.

“As a response to this situation SPP closed a new five-year contract with the E.ON company about natural gas supplies, which enables to import in the peak consumption period 2 million cubic metres of gas per day to Slovakia,” Fico said after a special session of his government to respond to the gas cuts, as cited by the SITA newswire. “It is one of the preventive measures.”

According to SPP, the contract is another of the preventive measures employed by SPP in reaction to the increased risk of restricted gas supplies from the east.

“In SPP, we are carefully monitoring the current situation and preparing thoroughly for various scenarios concerning development of the situation during the winter months, which is associated with greater consumption,” Štefan Šabík, chairman of the SPP board of directors said as cited in the SPP press reports. “In addition to existing tools, we adopted other measures, thanks to which we are capable of securing over 30 percent of standard daily consumption for our customers from independent sources in the event of an extraordinary situation, and so greatly reduce our dependence on supplies from the east as the only source of natural gas.”

The contract, which takes effect from October 2014, replaces the previous contract signed between SPP and E.ON Ruhrgas following the gas crisis of 2009. Compared to the original agreement, the contract provides more advantageous conditions for SPP in the form of a greater daily fixed volume with delivery point at Baumgarten in Austria, SPP wrote in its press release.

Slovakia, along with other European countries has been reporting gas cuts since mid-September. In response to complaints from Slovakia that the supplies decreased by half, the Russian gas producer Gazprom said on October 2 that gas flows to Slovakia have been stable over the last 10 days, according to Reuters. Gazprom’s spokesman Sergei Kupriyanov said that 48.1 million cubic metres of Russian gas flow every day via the Uzhgorod pumping station on Ukraine’s border with Slovakia.

Eustream which operates the pipeline that ships Russian gas via Slovakia further west, did not record pressure reduction or gas volumes decrease at the Compressor Station Veľké Kapušany on the border with Ukraine, according to the Eustream’s website.

In response to the first 50-percent cut in gas supplies, Fico called a special press conference the next day where he reported the drop in the supplies and told media that “secure supplies are a huge priority for the Slovak government but certainly also for SPP”.

Underground reservoirs are the main tools for covering daily gas consumption during the winter while the SPP currently has stored there more than 1.5 billion cubic metres of gas, Fico said adding that his government has taken measures of “diplomatic character”.

“We tasked our ambassadors in the most important countries to inform the respective states about the situation,” Fico said as reported by TASR, adding that Slovakia wants to coordinate the situation first of all with the European Commission, “where I do not exclude the possibility of pressing for personal meetings, because Slovakia and other countries in the region will need cooperation in the European region”.

The prime minister has ordered to revise all the crisis scenarios so that “we are prepared for anything that might come, from further reduction of supplies up to the complete halt of gas supplies”.

Slovakia continues its reverse gas flow to Ukraine, which is opposed by Moscow and many believe is the motivation for the recent cut in supplies.

Meanwhile, Michal Hudec, an analyst with the energy consultancy company Energy Analytics, said that strategies of natural gas traders on both the Russian and Slovak side might be behind the cuts.

“I would not consider this a tragedy,” Hudec said as quoted by TASR adding that the contract between Slovakia and Russia offers certain flexibility.

Cutting gas supplies for European suppliers has been lasting for a longer time and Gazprom is unwilling to explain them, said Jozef Badida, an analyst with the energieprevas.sk portal adding that the uncertainty makes it possible to hike market prices of gas at the spot markets.

“On the other hand, higher spot prices benefit Gazprom, since these hike purchase prices of gas for Ukraine,” Badida added.

Problematic reverse flow?

Slovakia’s Foreign Minister Miroslav Lajčák responded to the first information about cuts in gas supplies by saying that he cannot imagine that Slovakia would limit or lower the supplies of the reverse gas flow to Ukraine, the TASR newswire reported on September 11.

His statement came after reports by the Russian media that the Russian parliament might consider limiting or stopping the gas supplies to Europe through Ukraine, if the information about the re-export of Russian gas to Ukraine from EU countries through reverse gas flows is confirmed, TASR wrote. In that event, Russia would use the reserve capacities of the North Stream pipeline.

Poland, Hungary and Slovakia have been shipping gas to Ukraine via so-called reverse flows to help Ukraine, after Russian Gazprom halted gas supplies over a price dispute. Slovakia launched a reverse gas flow via the Vojany-Uzhgorod pipeline on September 2. The Slovak-Ukrainian reverse flow has the biggest potential daily capacity of the three reverse flow pipelines to Ukraine, at 27 million cubic metres.

Lajčák pointed out that curbing the reverse flow is not a question of a political decision.

“In question are specific contracts between companies,” said Lajčák, as cited by TASR, pointing out that full capacity of the Vojany-Uzhgorod pipeline was booked through the end of 2019. “This means that the state has neither the possibility nor the interest in entering into this.”

Upgrades since 2009

After being exposed to an about two-week gas supply cut in January 2009, Slovakia has sought to prepare for a potential shutdown of Russian gas supplies, on which is it nearly 100 percent dependent. Now, the country is better prepared, thanks to alternative contracts for gas supplies and measures related to emergency gas reserves, as well as improvements in short and medium-term solutions in gas infrastructure.

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