With temperatures across Europe falling, so has supplies of Russian gas, and that’s got the bosses at Gazprom scratching their heads.
There’s been a sudden drop off in the amount of gas arriving at European customers. Italy saw a 20% drop on Friday, and on Thursday Austria reported a 30% fall at its distribution hub at Baumgarten. European consumers aren’t likely to feel the difference as there are substantial stockpiles. “We will not have gas war, simply because forecasts on weather are saying that next week the weather will become milder, so the situation will not be that severe. The problem is that this cold weather goes from Western Siberia through Russia, Ukraine, Eastern Europe and Western Europe and therefore on this route to the Italian or Austrian consumers there are many consumers that want additional gas simply because their houses, boilers and power plants are not designed for such a severe weather condition. It is a peak situation, so-called peak demand”, says Tatiana Mitrova, head of Global Energy at Skolkovo Energy Centre.Gazprom Export director Aleksandr Medvedev was surprised. “Taking into consideration the severe winter in Russia and Europe our company increased supplies not only to European countries, but also to CIS countries, to Belarus and Ukraine in particular,” he said. Talking about European market Tatiana Mitrova added that "it’s impossible to buy additional gas on the spot markets, so European consumers turn back to the long-term contracts and are asking for additional over contract gas. There is such thing as daily contractual quantities, written in each long-term contract and now Gazprom is supplying much more than it is fixed in all official contracts". Medevedev suggests, “Ukraine is taking off gas in volumes that could correspond to 60 billion cubic meters a year, which is more than its contract volumes,” he said. The volume of gas that Ukraine should take daily is not set in the agreement with Gazprom.The Ukrainian gas distribution company Naftogas insists “the volumes of Russian gas in transit through Ukraine and the volumes taken by the country are within the limits established by the contract with Gazprom.” However, severe frosts forced the country to burn over 1 billion cubic meters of gas in three days and consume a record amount of electricity. “We have never had such huge consumption,” said the country’s Prime Minister Nikolay Azarov.The memories of the Ukrainian gas dispute of 2009, when a freezing Europe was deprived supplies of Russian gas heated the spot market. Prices have jumped 10% during the last week.