Ukraine’s legislative changes complicate gas imports

Legislation changes recently issued by the Ukrainian government have put a considerable administrative burden on importing gas to the country, and run the risk of blocking imports completely.

The cabinet of ministers in early May updated the list of Russian-origin goods prohibited for import to Ukraine. The rule change, which requires importers to provide a certificate of origin, is aimed mainly at banning imports of Russian crude, oil products and LPG. But natural gas was also included in the list.

The decree stipulates that gas importers must provide certificates which prove that their supply is of non-Russian origin. This might "significantly complicate or even block" the supply of natural gas to Ukraine, given the difficulties that may arise with confirming its non-Russian origin, a market participant told Argus .

The decree clearly indicates that gas transit is not subject to the new rules. And this probably applies to the transit of gas through Ukraine under short-haul tariffs, a source at the customs office told Argus .

At the same time, there is ambiguity regarding gas delivered to the country to meet local gas consumption and to store in Ukrainian underground facilities under the customs-free warehouse regime for subsequent re-export.

The new rules entered into force on 21 May and several European and Ukrainian companies have already received a refusal to use gas storage owing to the lack of certificates, a market participant told Argus .

Natural gas appears to have been included in the list by mistake without appropriate consultation with involved parties and the Ukrainian authorities intend to address this issue in the nearest future, several market participants told Argus . But they provided no further details on this.

Ukrainian gas imports have been extremely weak since the start of May. State-owned Naftogaz has had no need to import gas to cover local gas consumption since the end of the heating season, given particularly weak demand. And private-sector firms have no incentive to import gas, as the Argus Ukraine VTP front-month market has held a consistent discount to European markets since Russia's full-scale invasion of Ukraine in February 2022.

Gross imports have been around 650,000 m³/d so far this month, against 2.1mn m³/d in April, 13.4mn m³/d in March and 12mn m³/d in February.

But several companies planned to increase gas deliveries to Ukraine from June to inject into the country's storage sites under the customs-free warehouse regime, with the intention of re-exporting the supply back to Europe later. And some firms scheduled the bulk of their injections into Ukrainian underground facilities under customs-free terms for the third quarter, while Naftogaz's imports needed to cover local demand and maintain pressure in the gas system are likely to be delivered in the fourth quarter of 2023 and the first quarter of 2024.

By Anastasia Gasan

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