Ukrtransgaz, Hungary's FGSZ sign agreement allowing virtual reverse of gas

PJSC Ukrtransgaz, the Ukrainian operator of the gas transportation system, and Hungarian operator FGSZ on May 29 signed an agreement on the merger of cross-border gas pipelines (an interconnection agreement) between Ukraine and Hungary, the press service of Naftogaz Ukrainy has reported.

"The agreement concerns all gas pipelines crossing the Ukrainian-Hungarian border and is fully consistent with EU energy legislation. In this sense, this is the first such agreement between Ukrtransgaz and the gas transportation system (GTS) operator of the neighboring EU country. According to the intention of the European Commission, this agreement will serve as a model for other interconnection agreements between the gas transportation system operators of the EU member states and Ukrtransgaz," the press service said.

The interconnection capacity in the direction of Hungary is 26 billion cubic meters per year, towards Ukraine - 6.1 billion cubic meters per year.

"The agreement signed is the first step towards the establishment of full cooperation between Ukrtransgaz and the GTS operators of the neighboring states," reads the report.

According to Naftogaz, at present Ukrtransgaz cannot fully cooperate with the GTS operators of neighboring EU member states because of their current interaction scheme with Gazprom. This scheme was formed in Soviet times and does not meet the current legislation of the Energy Community, to which Ukraine belongs.

In particular, according to Naftogaz, Gazprom has not provided Ukraine with the so called shipper codes or information about individual batches of gas transported through Ukraine. At gas metering stations on the western border of Ukraine, the entire volume of gas is passed to Gazprom Export, a subsidiary of Gazprom. After that, Gazprom transfers gas to Ukraine's neighboring GTS operators, disclosing shipper codes to them.

"Thus, Gazprom undertook a number of important functions of the GTS operator, which violates the European energy legislation, because creates limitations for full cooperation between the operators of the neighboring countries on the territory of the Energy Community," Naftogaz summarized.

Contracts for interconnectors are the only legal basis for operational cooperation between the operators of adjacent gas transportation systems of Energy Community member states. On the basis of such contracts, they exchange information on gas flows, their directions, volume, time, customer, recipient, and so on. Without such an agreement the exchange of information is not implemented.

"Thus, Hungary became the first European Union country where the barrier was removed for a more complete integration of the Ukrainian gas transportation system into the European gas market. At present, work is underway to sign similar agreements with the Slovak, Polish and Romanian operators," the press service said.

Full-scale cooperation between the operators of Ukraine and the EU will eliminate infrastructure constraints on the volume of gas imports from the EU and will open the Ukrainian gas transportation system for European consumers.