Bloomberg News

Gazprom Boosts Capacity as EU Buyers Seek More Gas Amid Cold

February 03, 2012

(Updates with data from Italy in fifth paragraph.)

Feb. 1 (Bloomberg) -- OAO Gazprom, Russia’s natural-gas export monopoly, said it’s stretching to meet European demand during colder than usual weather, supplying less fuel than some customers are seeking.

Russian gas shipments to the Czech Republic fell, while in Italy the gap between requested volumes and deliveries widened. Gazprom is “significantly” raising European supplies from underground storage and filling pipelines even as a cold snap drives up demand at home, the company said in a statement.

Colder than normal weather across Europe, where Gazprom supplies about 25 percent of the gas market, has led customers to seek more fuel in past days. A mild start to the winter had allowed Europe to build higher than usual storage levels.

“Gazprom will almost certainly meet its minimum contract requirements,” Ronald Smith and Alexander Bespalov, analysts at Citigroup Inc. in Moscow, said in a note today.

Many European customers are asking for more gas than they can take, a Gazprom official who declined to be named, citing company policy, said by phone today.

The supplier is meeting contractual obligations to customers in Europe, Gazprom, the world’s biggest gas producer, said in a statement today. Importers may lower the amount they have to buy under take-or-pay contracts by the difference between requests and deliveries.

No Threat

Italy, Gazprom’s third-biggest gas market outside the former Soviet Union, received 12 percent less gas than it sought today, data from Snam Rete SpA, the Milan-based gas-pipeline operator, showed.

Russian gas supplies to RWE Transgas, the Czech Republic’s dominant gas supplier, have declined “several percent,” which poses no threat to the country, said Martin Chalupsky, a spokesman. RWE Transgas’s underground gas storage is 75 percent full due to previously mild weather, which is sufficient to supply households “for weeks if not months” without interruption, he said.

Temperatures may fall to 4 degrees Celsius (39 degrees Fahrenheit) in Rome tomorrow and to minus 13 degrees in Prague, according to CustomWeather Inc. data on Bloomberg.

Temperatures in most Russian regions are 7 degrees to 12 degrees Celsius lower than normal and may fall as low as minus 50 degrees in the eastern Magadan region in the next several days, Russia’s Hydrometeorological Center said on its website. Moscow, the biggest gas-consuming region, has had minus 22 degrees weather that may ease to minus 16 degrees in a week, according to CustomWeather Inc. data.

Maximum Capacity

“The company has engaged all of its gas transportation routes and significantly boosted supplies from its underground storage facilities in Europe to meet export requests,” Gazprom said today in a statement.

Supplies through Yamal-Europe have risen 20 percent since last week, while the Blue Stream gas pipeline across the Black Sea to Turkey has been operating at its maximum capacity since the start of January, Gazprom said today.

Cold weather in Europe hasn’t created a supply shortage as stocks are full after a mild winter up until now, Jean-Francois Cirelli, vice chairman and president of GDF Suez SA, Europe’s largest utility by market value, said today.

Polskie Gornictwo Naftowe i Gazownictwo SA, Poland’s dominant gas company, said it reduced supplies to three industrial customers, and pipeline operator Gaz-System SA said it will ask the government today to release mandatory reserves of the fuel to stabilize the system.

Ukraine expects supplies to last through the heating season, Deputy Prime Minister Andriy Klyuev said.

“We don’t anticipate any actual shortages to be experienced in Europe,” Citigroup’s Smith and Bespalov said.

--With assistance from Marek Strzelecki in Warsaw, Tara Patel in Paris and Ladka Bauerova in Prague. Editors: Torrey Clark, Stephen Cunningham

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

To contact the editor responsible for this story: Torrey Clark at tclark8@bloomberg.net


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