Ukraine gas-supply agreement end in two months, Gas storage at all time low.

Ukraine gas-supply agreement end in two months, Gas storage at all time low..(Bloomberg).

With less than two months before Ukraine’s Russian gas-supply agreement ends, analysts are warning of critically low storage that would threaten all of Europe.

There’s been little progress on a new deal before the March 31 expiry, with Russia saying it will revert to a standard contract based on disputed prices that won’t be reviewed by international arbitrators until 2016. If the supply stops, then Ukraine’s inventories may shrink to the smallest in a decade by Oct. 1, says Eclipse Energy Group, a consultant in Norway.

That raises the risk that Ukraine will need to use Russian gas destined for the European Union next winter, according to Energy Aspects Ltd., a London-based consultant. The 28-nation EU is seeking to help broker a new deal because Russia supplies a third of its gas, with 40 percent flowing through pipelines across Ukraine. Flows to Europe via Ukraine were disrupted during pricing disputes in 2006 and 2009.

“If they cannot re-inject enough gas, the risks for Europe will be greater next winter than this winter,” May Mannes, head of gas and liquefied natural gas analysis at Stavanger, Norway-based Eclipse, said by phone Jan. 22. “Ukraine’s need for storage re-injection has been overlooked by many.”

Flows via Hungary to Ukraine dropped to 5,000 cubic meters a day in the past weekend from previous average daily shipments of about 3 million cubic meters a day, Hungary’s daily Vilaggazdasag reported Tuesday, without citing anyone. “Hungary isn’t selling any gas to Ukraine,” Hungarian Foreign Minister Peter Szijjarto said Tuesday on public radio Kossuth. “The amount of gas that transits to Ukraine via Hungary depends on Ukraine’s ability to purchase gas from European partners.”

Ukraine will have 10 billion cubic meters in storage in October if it only gets fuel from the EU and its own production, said Mannes, who has tracked the industry for two decades. That compares with 16.6 billion last October and 23.1 billion on average in the past 10 years. Read the full story here.