By Costis Stambolis
As the powerful Russian company Gazprom cut gas supplies to Ukraine in the morning of the first day of the new year, following prior repeated warnings by Moscow to the government of Victor Yushchenko to agree a new all cash deal with higher prices or face gas delivery disruptions, several European countries faced gas shortages. When Ukraine failed to agree revised terms with Russia, Gazprom, much to the discontent of the EU, went ahead and realized its threat by cutting off gas supplies to its neighbour which acts as a transit country for Russian gas. Gazprom demanded from the Ukrainian government that it pays $230 per 1,000 cubic metres of gas, up from $50 until now. Gazprom has unilaterally terminated its current agreement with Naftogaz, the Ukrainian state gas company, insisting in an all cash payments deal. So far Naftogaz in lieu of transit fees it was paid in kind, through gas deliveries. However, this method, according to Gazprom lead to the diversion of substantial gas quantities and apparent loss to the Russian energy company.
Gazprom insists that the reduced supplies were meant to affect local use only but Naftogaz in an effort to maintain uninterrupted gas supplies within the country diverted gas that was meant for export. This lead Moscow to accuse Kiev that it was siphoning off gas that was meant for exports. Last Sunday morning Ukraine found itself in a difficult spot since at the same time with Gazprom, which supplies 30 per cent of Ukrainian needs, Turkmenistan which supplies another 45 per cent also cut off supplies, apparently in collusion with Russia.
Europe obtains a quarter of its gas from Russia with approximately 90 per cent of its supply crossing Ukraine by pipeline. Western and Eastern European countries are served by the ‘Friendship’ group of pipelines crossing the northern part of the country while Greece, Bulgaria and Romania are served by a southern branch. So far only supplies routed through the ‘Friendship’ pipeline complex have been affected.
Gazprom’s cutback has resulted in shortfalls ranging from 15 to 40 per cent in several European countries, most notably in Italy, France and Austria. Many central and eastern European countries which depend heavily on Russian gas have been especially affected. Europe obtains 23 per cent of its gas supplies from Russia and the outlook is for this figure to increase as North Sea supplies diminish.
So far Gazprom deliveries to Greece have been maintained at normal levels. Greece currently consumes 2.8 billion cubic metres of gas per year of which it imports 2.2 bcm’s from Russia, via pipeline, and the rest from Algeria in liquefied form in special LNG type ships. Algerian gas is stored in the LNG terminal located on the islet of Revithousa off Megara, south west of Athens. Early this week, through the minister for Development Mr.Dimitris Sioufas, the Greek government expressed concern over the possibility of reduced gas supplies from Russia. Mr. Sioufas met the Russian and then the Ukrainian envoys to convey the government’s disquiet on the matter.
According to sources at DEPA, the state controlled gas company, the natural gas system is well supplied thanks to the LNG terminal which can store up to 130,000 cubic metres of gas. The company has already asked for increased deliveries of LNG from Sonatrach, the Algerian supplier. The bulk of gas use in Greece is for electricity generation since the state run Public Power Corporation (PPC) has three power stations, totaling 1,265 MW of installed capacity, operating with natural gas. PPC consumed approximately 2.0 bcm’s of gas last year corresponding to 71 per cent of the total country consumption. The rest is being used by industry, commercial and household consumers. “ If gas supplies to Greece were to be reduced or even stopped, assuming a worsening of the crisis in Ukraine, PPC supplies will be immediately affected. The government has contingency plans whereby PPC will be ordered to switch entirely into indigenous supplies such as lignite and hydro, from where it traditionally generates most of its electricity”, says a well informed energy expert. In this way gas supplies will be secured for the domestic sector where more than 120,000 households rely on gas for heating and cooking. The government is putting a lot of effort in promoting gas use for industry and households. Greece, which is a relatively late comer to gas use, with first gas imports realized as recently as 1997, has made a serious effort over the last years to introduce and market natural gas as a clean energy fuel and substitute to oil and coal.