Naftogaz urges expansion of Slovakia-Ukraine gas transmission interconnector capacity

After two months of successful operation of the Vojany-Uzhhorod pipeline, Naftogaz of Ukraine has proposed to Eustream, Slovakia’s transmission system operator (TSO), a technical solution for a considerable capacity increase of this gas transmission route. The pipeline, with current capacity of 27mcm/day (nearly 10bcm/year), was officially launched in early September 2014 to supply natural gas to Ukraine from the EU via Slovakia. Naftogaz hopes that the Slovakian operator will support prompt implementation of the proposed solution.

Ukrainian TSO proved its ability to directly cooperate with EU partners

Operation of the Vojany-Uzhhorod pipeline clearly demonstrates that Ukrainian and Slovakian TSOs can provide fully reliable cross-border gas flows via technically robust direct interconnection.

Major European energy companies have been able to use this new interconnector to transport significant volumes of gas, reflecting the system’s technical capabilities and the fact that Ukraine can operate to the highest standards of the EU gas market.

That is why Naftogaz is now confident that there are no remaining legitimate barriers to signing a direct interconnection agreement for all pipelines that connect the neighbouring gas transmission systems of Ukraine and Slovakia.

Intermediary blocking the additional two-way flow capacity should be removed

Aside from the newly-launched Vojany-Uzhhorod pipeline, the old-grid interconnection between Slovakia and Ukraine has capacity of nearly 100 bcm per year. The ‘big reverse flow’ solution allows for reverse flows of the same volume in the West-to-East direction. A technical term for this solution is “backhaul”, which is a standard practice in Europe fostered by implementation of the Third Energy Package.

The solution is currently being blocked by Gazprom on the grounds of a legacy contract with Eustream, despite the fact that nearly half of the old-grid interconnector capacity is idle. The grandfathering rule is not applicable to the Third Energy Package unless an exemption is justified and explicitly granted by the European Commission. Therefore, this contract should be amended to enable two-way gas flows.

Unlocking additional unutilised capacity will strengthen energy security in vulnerable CEE countries

Slovakia is one of the few CEE countries that have an excellent physical connection to the liquid and developed Western European gas market. Expanding West-to-East flows between Slovakia and Ukraine is not only critical for the energy security of Ukraine but also provides for diversification of supply routes for CEE countries such as Poland, Romania, Hungary, Bulgaria and Serbia.

As the stress tests recently conducted by the European Commission show, these countries are particularly vulnerable in case of disruption of gas supplies from Russia. Using interconnectors between these countries and Ukraine would significantly improve their choice of supply sources.

Direct interconnection agreement between Ukrainian and Slovakian TSOs is legal, justified and will help to reduce gas prices across Europe

Ukrtransgaz has proposed to Eustream to sign a direct interconnection agreement for the full capacity between the two operators. Opening this capacity does not require any investment or legislative change, only implementation of existing EU law on EU territory. Naftogaz hopes that the importance for the entire CEE region of opening up two-way flows on this route will merit decisive action from the EU.

In its recent statement, the Energy Community confirmed that fostering two-way cross-border flows is a priority task that equally relates to Ukraine and neighbouring EU member states.

Full implementation of European energy legislation and integration of the Ukrainian gas transmission system into the European gas market will considerably improve the European market’s liquidity and potentially lead to a reduction of gas prices for final consumers across the continent.