26.03.09

Ukraine cut transit of Russian gas to European consumers by 53.2% in the first two months of 2009, as compared to the same period of last year. The major reason for the drop in transit is declining demand for Russian gas in Europe.

According to the latest figures from the Fuel and Energy Ministry, Ukraine cut transit of Russian gas to European consumers by 53.2% in the first two months of 2009, as compared to the same period of last year: down to 11 billion cubic meters. Inna Koval, spokeswoman for UkrTransGaz (Ukraine's gas transport system operator), told Reuters that transit volumes dropped due to Europe's reduced gas consumption. Gazprom's media directorate said that lower demand for Russian gas in Europe is mostly due to the global financial crisis.

Russia's statistics confirm the decline in demand for gas. According to the Federal State Statistics Service (RosStat), Russia's gas production volume for the first two months of 2009 was 12% lower than for the same period of 2008: down to 105 billion cubic meters. Around 80% of Russia's gas output is exported to Europe via Ukraine.

Alexander Shtok, head of the Due Diligence Department at 2K Audit Business Consulting, says that the steep decline in January's gas transit figures was partially due to the gas conflict between Russia and Ukraine: the dispute stopped gas deliveries to Europe for twelve days. Gas volumes grew once transit was resumed, but have not reached their earlier levels - since the major reason for the drop in transit is declining demand for Russian gas in Europe. Russian gas prices are currently at peak levels - but Shtok points out that they will start falling rapidly in the next month or two. That's why European countries are choosing to use gas from their underground storage facilities at present. As soon as Russian gas prices fall, European countries will start buying as much gas as they did before. Sales may even increase, since EU countries will need to rebuild their reserves. All the same, Russia's year-end gas export figure for 2009 is sure to be lower than the result for 2008; but Shtok predicts that the drop won't be as substantial as it was in the first two months of 2009.

Natalia Milchakova, senior analyst at Otkritie Finance Corporation, estimates that Gazprom's revenues from gas exports to countries outside the CIS will amount to $11-12 billion in the first quarter of 2009: 36-42% less than in the first quarter of 2008. Milchakova's forecast for Gazprom's total revenues from gas exports to countries outside the CIS in 2009 is $50-52 billion: 25% below the figure for 2008.

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Source: RBC Daily