Ukraine makes use of Moldova gas backhaul services after government approval: GTSOU

Ukraine is making use of the newly approved gas backhaul procedure approved earlier this year by the government of Moldova to help fill Ukraine's underground storage facilities, Ukraine's state-owned gas grid operator GTSOU said Feb. 6.

The government of Moldova in January allowed all traders to use backhaul practices, unlocking the supply of gas via the Trans-Balkan route, GTSOU said.

The use of backhauling -- or virtual reverse flow -- allows for gas flows to be netted out by Ukraine and Moldova.

Any gas bought by Ukrainian traders for delivery on the Trans-Balkan pipeline in a south-north direction can be held by Moldova, while Ukraine can keep Russian gas in its storage sites that was intended for Moldova.

Backhauling is preferred by traders because it is a more cost-effective practice than shipping physical gas across the border.

"The essence of the virtual reverse is to optimize the transport work of system operators, in particular in the presence of demand for cross-border transport in both directions," GTSOU said.

"Operators carry out physical transportation in only one direction, and gas is transported in the other direction using a virtual reverse -- or backhaul," it said.

"The gas is not physically moved across the border, and the parties carry out mutual settlements. This is one of the most progressive commercial methods of the European gas market."

The start of backhaul via Moldova has been mostly aimed at providing Ukraine's energy security by diversifying its sources of gas supplies.

Ukraine stocks

Ukraine's gas stocks have fallen to about 11 Bcm as of Feb. 1, down from 11.7 Bcm in early January, amid warmer-than-usual temperatures and weaker demand from industrial consumers and power units, many of which have been destroyed by Russian missile strikes in recent months.

Ukraine had built its gas stocks to some 14.5 Bcm before the start of the 2022/2023 winter, well below the target of 19 Bcm.

Record high gas prices last summer limited Ukraine's ability to import gas, hampering efforts to fill storage.

Platts, part of S&P Global Commodity Insights, assessed the benchmark Dutch TTF month-ahead price at an all-time high of Eur319.98/MWh on Aug. 26.

Prices have weakened since on the back of healthy storage and demand curtailments with Platts assessing the TTF month-ahead price on Feb. 6 at Eur58/MWh.

Ukraine has been marketing its gas storage facilities for years as a viable option for keeping extra gas for European customers to be used during winter when gas demand rises.

This practice of storing gas in Ukraine was put to the test last year following the Russian invasion, but all gas kept by European traders in Ukrainian storage facilities was safe and used to sustain gas supplies on the European markets.

"Last year, European countries, even against the background of the war, were able to see the importance of the Ukrainian gas storage facilities and the reliability of Ukraine as a partner," Pavlo Stanchak, the acting head of GTSOU, said in the statement.

"The gas infrastructure of Ukraine played the role of a buffer between seasonal peaks of demand and supply, and also ensured the necessary flexibility of the energy system of European countries when using renewable energy," he said.

"We offer our partners cooperation that will strengthen the energy market in Europe and contribute to the further integration of Ukraine," Stanchak said.