Nafogaz says Ukraine may face gas shortages during winter

Nafogaz says Ukraine may face gas shortages during winter

Kiev (Platts)--7Jun2006

Ukraine may face shortages of natural gas during the winter when demand
for energy sharply increases, an official at Naftogaz Ukrayiny, the national
oil and gas company, said Wednesday.

Naftogaz gas been lagging behind schedule in purchasing enough gas to be
stored in underground gas tanks that is usually used when demand increases,
the official said. "If the problem is not addressed within the next two weeks,
things will not look good," said the official, who asked not to be named. The
comment echoes remarks made Tuesday by Alexei Miller, the CEO of Gazprom, the
Russian gas monopoly, who had predicted the shortage may be between 3 billion
cu m and 4 Bcm of gas.

RUNNING BEHIND SCHEDULE

Naftogaz usually has to buy and store in gas tanks about 18 Bcm of gas by
October 15, when a six-month heating season begins in Ukraine boosting demand
for gas. Naftogaz has not been disclosing statistics of how much gas has been
stored so far, but industry sources said only 1.5 Bcm had been stored during
the past 2.5 months. This is only 16% of what had been required to be stored
in the same period, the sources said.

NATURAL GAS DEBTS

The looming gas supply shortages come as Naftogaz has reported it was
running about $605 million in debt to RosUkrEnergo, Ukraine?s only natural gas
supplier, for gas deliveries in April and May. Naftogaz, who has been seeking
to borrow money internationally to pay back the debt, said it planned to do so
by June 20. Gazprom, which has been traditionally storing its gas in Ukraine
for the winter, has recently infirmed Naftogaz that it had stopped pumping gas
in the tanks and will probably seek to store gas elsewhere.

GOVERNMENT TO BE FORMED

Meanwhile, the developments come as Ukrainian parties are holding
difficult talks to form the new government following the March 26 general
election. The lack of a capable government in Ukraine has been delaying talks
with Russia over gas supply prices and volumes in the second half of the year.
"We are waiting for the new government to be formed to be able to negotiate
with Russia," the official said. Ukrainian President Viktor Yushchenko has
said the government should have been formed by the middle of June.

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