Slovakia's SPP dismisses report of imminent deal for gas supply via Ukraine

Slovakian gas importer SPP has dismissed a report that Slovakia -- together with Hungary -- was close to signing a contract with Azerbaijan for continued delivery of gas via Ukraine with its participation.

A report late Oct. 31 said Hungary and Slovakia were close to signing a deal for 12-14 Bcm/year of gas to be delivered via Ukraine, with the supply to be managed by Azerbaijan's Socar and transport by SPP and Hungary's MVM.

SPP has long supported the continuation of gas transit through Ukraine, but information on the gas supply deal was not true, a spokesperson told S&P Global Commodity Insights Nov. 1.

"We regularly discuss the topic with our partners, but the information about the upcoming conclusion of a gas supply contract with the participation of SPP is not true," the spokesperson said.

Neither MVM nor Socar could be reached for additional comment.

European gas prices fell Oct. 31, with Platts -- part of Commodity Insights -- assessing the benchmark Dutch TTF month-ahead price at Eur39.85/MWh, down almost 3% on the day.

Slovakia is largely dependent on Russian gas imports via Ukraine, but the SPP spokesperson said the company would guarantee secure gas supplies for its customers "in any situation."

Slovakia has diversified its supply routes with the construction of pipeline connections with Hungary and Poland and increased reverse flow capacity via the Czech Republic and Austria.

The current five-year Russia-Ukraine gas transit deal expires at the end of 2024 and Russian gas flows to Slovakia would cease if no new arrangements are put in place.

Some 42 million cu m/d of Russian gas still flows to Europe via the Sudzha interconnection point on the border with Ukraine.

Transit talks

In May, SPP told Commodity Insights it considered the creation of a European consortium to take delivery of gas at the Russia-Ukraine border as "feasible" to ensure continued supplies of Russian gas via Ukraine post-2024.

Azerbaijan, meanwhile, has been in talks in recent months with Russia and Ukraine over the potential to facilitate continued gas transit via Ukraine.

Azerbaijan President Ilham Aliyev said Sept. 6 he remained optimistic about the negotiations and for a breakthrough in the talks.

Ukraine's Naftogaz has also said it has held talks with Socar on the potential transit of gas from Azerbaijan via Ukraine and the storage of Socar gas in Ukraine.

Naftogaz CEO Oleksiy Chernyshov said two scenarios were possible: a complete stop in flows or a model of alternative suppliers and owners to ensure volumes can be delivered to customers in the EU.

Chernyshov also said a "prerequisite" for cooperation would be an offer for Socar to store gas in Ukrainian storage facilities.

Naftogaz could not be reached for additional comment Nov. 1.

Russian gas transit via Ukraine was as high as 117 Bcm in 2008 but fell to just 14.65 Bcm last year.

Any agreement for gas to be delivered via Ukraine would need the approval of officials in Kyiv.

Ukraine's Prime Minister Denys Shmyhal said Oct. 7 that Kyiv would not extend the transit agreement with Moscow when it expires.

Slovakia has pushed hard for new arrangements to be found to enable Russian gas to continue to flow via Ukraine into Slovakia.

Slovakia also earns revenue as a transit state for Russian gas coming via Ukraine to be sent onward to Austria.

"We understand the acute dependence of some countries, in particular Slovakia, on this resource," Shmyhal said. "But we are counting on the gradual diversification of supplies."

Russian President Vladimir Putin, meanwhile, said Sept. 5 that Moscow was prepared to continue gas supplies via Ukraine.