LLC Gas TSO of Ukraine statement on expected maintenance at SK-UA border (IP Budince)

The main task of any gas TSO is to ensure the safe operation of the gas transmission infrastructure to provide uninterruptable services to clients. It is our obligation by the law and best business practices to take timely measures to prevent and fix technical defects to avoid major interruptions in the system. Ukrainian TSO’s specialists have detected such issues on the pipelines at SK-UA border (IP Budince) and suggested to take the necessary measures this year to guarantee the readiness of this infrastructure before the start of the heating season. As this is the only gas pipeline with the firm capacity towards Ukraine from the EU, we have to act in the best interests of the country gas security of supply.

Our goal is to protect safe passing of the heating season to cover peak consumption in Ukraine, when local gas production and withdrawals from gas storages cannot satisfy local gas demand. Our estimations show that to make necessary repairs by October 1 (date of start of the heating season) we need to start our works no later than August 11. Eustream proposal to postpone the repair until next year was duly considered and has to be refused as it threatens the security of the supply of Ukraine and the whole region. In addition, the current severe flood in the region requires our immediate reaction on other more important repairs caused by the extreme weather conditions.

We, as a prudent TSO, value our business and cooperation with the Slovak TSO. Thus, our colleagues were timely informed about the situation to find a joint solution that would minimize interruption for traders, who are actively importing gas to Ukraine through Slovakia. It is in our joint interests to minimize interruption of the use of Ukrainian gas storages for the EU, especially given current year market conditions. However, we cannot risk technical security. The Ukrainian TSO welcomes Slovak technical specialists’ opinion, but is bound by the law to act strictly following Ukrainian protocols of technical maintenance.  For decades Ukrainian engineering staff has proven to be able to ensure TSO’s safe and reliable operation by applying our strict standards, in particular by executing scheduled and urgent repairs.

The Ukrainian TSO acknowledges the problem, but we also suggest a mutually feasible solution of using a much bigger infrastructure in IP Velke Kapusany (200 mcm/day) near IP Budince (42.5 mcm/day) during the repair works. This is a perfect existing route to avoid interruption of the services for traders, which does not require any additional financial or technical investments from Eustream. Two options are being available for our partners at Eustream, which are fully aligned with EU regulations: 1) creation of a single virtual interconnection point by uniting IP Budince and IP Velke Kapusany, and 2) allowance free transfer for shippers of the booked capacities from IP Budince to IP Velke Kapusany during the period of maintenance. Our principal position is that shippers should not be penalized and bear additional costs for such unexpected events. The current transit volume of Russian gas from Ukraine to Slovakia via IP Velke Kapusany is about 109 mcm/d, which means that the same volume potentially could be easily imported to Ukraine by virtual reverse flow (netting of flows). The virtual reverse at IP Velke Kapusany is already possible since March 1, 2020, according to the valid Interconnection Agreement between TSOs. We anticipate the risk of interruption as minimal and may only happen in case of volume of transit of gas from Russia would decrease below 27 mcm/day (the size of firm capacities from SK to UA via IP Budince). Considering the volumes recently sold by Gazprom to be delivered in Q3 at VTP Slovakia such sharp reduction of Russian transit is very unlikely.

From our point of view, the proposal of creating a single virtual interconnection point at the border is the systematic solution, which is fully aligned with EU energy law, gas network codes and the best business practices, spirit and goals of Energy Community Treaty and Energy Union. Such virtual points were recently created at Poland-Ukraine and Hungary-Ukraine borders. Those countries also voluntary implemented CAM network code at those virtual interconnection points and use auction-based capacity allocation mechanism via booking platforms, which brings more transparency and flexibility to shippers. Eustream still uses ad hoc first-come-first-served approach, which is highly criticized by many shippers for non-transparency. However, we understand that implementation of those standard EU rules is not mandatory for Slovakia and subject to decision of the Slovakian Energy Regulator.

The suggested approach will be tested on the border with Poland as soon as 1st July 2020, where a similar virtual point combines two physical pipelines on the border. The TSOs of both countries expected to flexibly redirect flows between physical pipelines with no changes to commercial flows. We consider this option as the safest and fastest one for the market and TSOs.

There was no agreement reached with our colleagues from Eustream on the options proposed by the Ukrainian TSO as of June 22. Therefore, we were forced to officially notify all traders about repair works and limitation of supplies through this gas pipeline 42 days in advance (as required by the Annex I to Regulation 715/2009 on conditions for access to the gas transmission networks). We completely reject allegations of untimely informing market participants as we are postponing the works until August 11 to provide shippers enough time to react and adopt. However, we still believe in finding some other options with no change in the repairs schedule.

The Ukrainian TSO expects appropriate permissions from the Ukrainian regulator regarding the possibility of free of charge transferring of the booked capacities from IP Budince to IP Velke Kapusany at the Ukrainian side in the coming days. We hope that Eustream and the Slovak regulator will find a similar opportunity to decide on either creation of a single virtual point or the free transfer of the booked capacities. We are happy to state, that EFET welcomes the solutions offered by GTSOU.

The Gas TSO of Ukraine is always eager to find solutions with Eustream to fulfill market demands, but we have the safety of the system as our highest priority. We are open to the comments and suggestions by the Slovak energy regulator, Energy Community Secretariat, DG Energy, ACER, and ENTSO-G into the dialog to find a solution to the existing situation.