Slovak gas buyer SPP continues to talk about extending Ukraine transit

SPP's Chief Executive Vojtech Ferrencz stated on Thursday that the Slovak government-owned gas buyer SPP continues negotiations with Ukraine to extend the gas transit contract after Kyiv’s contract with Russian gas supplier Gazprom expires in the next few months.

Ukraine has stated that it does not wish to renew the transit agreement, but certain central European countries depend on Russian gas delivered via pipelines which cross the country. They have secured an exemption from the European Union's ban on Moscow’s gas imports.

SPP has taken a lead in attempting to keep transit open, despite Russia's conflict with Ukraine. Alternative routes are more expensive and they face potential bottlenecks on other pipelines.

"When I consider all the risks, I think that the transit must be maintained to avoid artificial prices in central Europe," Ferencz said on the sidelines a gas-related conference in the Slovak mountain resort Horny Smokovec.

In December, the transit extension was signed. "There are many options as to what could happen."

Ferencz confirmed, after a recent trip to Baku that he was considering the possibility of involving the Azeri company SOCAR. SOCAR could transport gas across Ukrainian territory, avoiding the need for Kyiv dealing with Gazprom. However, he said nothing had yet been decided.

He said that the easiest way to involve SOCAR is to have it return the gas to Gazprom at the Ukraine-Slovak Border, allowing Gazprom continue to service its European customers.

SOCAR didn't immediately respond to an outside-of-business hours comment request.

Ferencz said that discussions with Kyiv regarding the status quo continued despite Ukraine rejecting this scenario.

Ferencz stated that the transit could be under the ownership of another intermediary, such as a consortium including SPP. Gazprom might also try to find a different delivery route.

Gazprom was not available for comment on Thursday evening.

SPP, which provides for two-thirds of Slovak gas consumption, purchases 3 billion cubic meters of gas annually from Gazprom, under a contract that lasts until 2034.

Ferencz stated that the volume of Russian gas expected to flow through Ukraine in 2014 should be maintained, and any new agreement should keep this level, since shipping only to Slovakia will increase transit costs too much.

He also said that he will travel to Brussels in order to discuss the European Commission's support for a new agreement.

Ferencz stated that SPP had 14 TWh in storage and an additional 3 TWh in reserve, as well as five alternative gas supply contracts, and two others under negotiation. This was enough to cover the heating season for its customers. (Reporting and editing by Kirby Donovan; Jan Lopatka)

(source: Reuters)