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Ukraine demands immediate South Stream consultations with Energy Community

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Nov. 27, 2012, 1:33 p.m. | Ukraine — by Interfax-Ukraine

Russian Premier Dmitry Medvedev, right, shakes hands with visiting Slovenian counterpart Janez Jansa after signing documents on the South Stream pipeline construction at the Gorki residence outside Moscow on Tuesday, Nov. 13, 2012. The South Stream pipeline, due to start operating in 2015, would ship up to 63 billion cubic meters of gas annually from Russia under the Black Sea to Bulgaria, Serbia, Hungary, Slovenia, Austria and Italy in one leg, and Croatia and Greece in a second.
© AP

Ukraine's Energy and Coal Industry Ministry has again requested of the Energy Community Secretariat the immediate initiation of consultations over the South Stream gas pipeline project, which runs counter to Ukraine's national interests, an informed source in the government has told Interfax-Ukraine.

"In our view, the situation that has developed puts in doubt the effectiveness of the realization of the Energy Community's main tasks involved in the creation of a unified energy market," the Interfax source quoted part of a ministry letter as saying.

Ukraine is providing an uninterrupted supply of energy resources to Europe, but the large-scale planned work to modernize the country's gas-transport system requires long-term guarantees of natural gas transit volume through the country, the ministry maintains.

"However, despite the availability of the reliably functioning Ukrainian gas-transport system, which ensures the uninterrupted delivery of energy resources to countries in Europe in conditions of an absence of investments, certain member-countries of the Energy Community are doing work on part of the South Stream project," the letter says.

The Energy and Coal Industry Ministry points out that it has more than once informed the European Commission and Energy Community Secretariat of the negative view in Ukraine regarding the South Stream project and has asked for immediate consultations in the context of the Treaty Establishing the Energy Community, but to no effect.

As a result, the ministry says, at the Russkaya compressor station (Anapa, Russia) is planned on December 7 a ceremony marking the welding of the first joint of South Stream with Russian President Vladimir Putin in attendance.

In the eleven-year natural gas transit agreement Ukrainian national oil and gas company Naftogaz Ukrainy and Russian gas monopoly Gazprom signed in 2009, there are no stipulations as to the minimum guaranteed amount of transit gas or fines for failure to meet it. The associated contract was built around the 'take or pay' principle, and although Gazprom is not fining Naftogaz Ukrainy for reducing purchase volumes, the risk is always there, and Kyiv's many attempts to get both contracts revised have proved fruitless.

With the launch of the first stretch of the Nord Stream pipeline, which bypasses Ukraine, and Gazprom's increased use of the Belarusian pipelines it controls, the transit of Russian gas through Ukraine continues to fall, further worsening Naftogaz Ukrainy's already difficult financial situation. in particular, in January-October this year the amount transported through Ukraine to countries in Europe and the Commonwealth of Independent States dropped off 19.2% year-on-year (by 16.4 billion cubic meters (bcm)) to 69.2 bcm.

South Stream is an alternative to Nord Stream that also bypasses Ukraine. Its first stretch will have throughput capacity of 15.75 bcm and total designed capacity of 63 bcm per year and, taken with other measures, could lead to a further decrease in transit through Ukraine.

Ukraine's gas-transport system has carrying capacity at intake of 288 bcm and at outtake of 178.5 bcm, including 142.5 bcm in countries in Europe and 3.5 bcm in Moldova.

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