Monday, September 15, 2014

A decision by Russia to cut its gas exports to Poland without warning rekindled fears last night about Europe's reliance on Siberian gas at a time of increasing tension between Moscow and the west. The Polish state energy group, PGNiG, said it was trying to find out why volumes had been slashed by up to 24% at a time when it had been exporting gas itself to Ukraine to make up for Russian shortfalls there. Its counterpart in Kiev, Ukrtransgaz, accused Kremlin-controlled Gazprom of deliberately penalising Poland and undermining onward gas supplies to Kiev. "Today Russia started limiting gas supplies to Poland in order to disrupt the reverse (flows) from Poland that we receive ... Poland stopped reverse supplies to Ukraine in the range of 4m cubic metres," said Ihor Prokopiv, chief executive of Ukrtransgaz, according to the Russian news agency, RIA. Nick Perry, a British energy consultant, said that it was not surprising that the west was nervous about Gazprom's actions. "Since the 1990s, the International Energy Agency (IEA) has been investigating how Europe would survive if they lost some of its biggest sources of gas for six months. People have been looking at this for a long time." But Gazprom sources insisted the shortfall could be attributed to maintenance work that was going on fields and pipelines ahead of the important winter season when demand is at its highest. A formal statement from the group sidestepped the issue by saying it was pumping gas to all destinations "according to the resources available for exports and for the continuing pumping to storage facilities in the Russian Federation".
Jonathan Stern, a gas expert at the Oxford Institute for Energy Studies and a member of the EU-Russia Gas Advisory Council, believed there was more likely a technical not a political problem....well ... Doesn't Poland have an agreement with Russian Gazprom, in which it stated that it is not allowed to 'reverse flow' gas? Therefore Poland should blame themselves for breaking the contract in the first place. Think about it as a business. You sell two people apples (A and B). You sell them at difference prices in accordance with the a long-term contract, 'A' for lower price and 'B' for higher. Then A decides to make a himself a profit and starts reselling those apples to the other person (B). Soon, B decides to stop buying apples from you and rather buy them from A. Hence you lose-out on your profits. You can take A as being Poland, B as Ukraine, and you the apple seller as Russian Gazprom. See the logic?

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