Page last updated at 20:52 GMT, Saturday, 12 September 2009 21:52 UK

Gazprom concern at Ukraine bill

By Bridget Kendall
Diplomatic correspondent, BBC News

Alexie Miller, Gazprom
Alexei Miller described Ukrainian relations as good

The head of Russian gas giant Gazprom, Alexei Miller, has expressed concern that Ukraine might not be able to pay its gas bills beyond 2010.

Mr Miller said Ukraine was currently fulfilling all its obligations, using funds from its currency reserves, the IMF and other sources.

However, he said it was unclear if the reserves would cover the next Russian gas bill, due on 7 February 2010.

He also expressed concern about Ukraine's presidential elections.

They are due to be held in January 2010, and could introduce political risks.

Tough line

Describing the current payment situation, Mr Miller said it looked as though the reserves were sufficient to pay Gazprom until the end of December.

"Relations could not be better," he told a visiting group of foreign academics and journalists at Gazprom's headquarters in southern Moscow.

I hope there will be no new catastrophe
Alexei Miller

But he added that when he had asked officials at the Ukrainian gas company Neftegazukraine how bills would be paid in 2010, they had answered by swearing broadly and saying they had no idea.

He confirmed that Ukraine had recently asked if it could use future transit fees from Russia to help pay Gazprom for gas supplies.

Mr Miller said he had informed the Russian government, but been instructed to stick strictly to the contract and refuse the request.

"I hope there will be no new catastrophe," he said ominously - apparently not ruling out a new Russia-Ukrainian winter gas crisis.

Mr Miller also took a tough line when it came to negotiations with Turkey over routing a planned South Stream gas pipeline under the Black Sea to Turkey, bypassing Ukraine.

A suggestion from a Turkish visitor in the group that this could help turn Turkey into a major regional gas transit hub was brusquely rebuffed.

"Turkey cannot re-export Russian gas to other countries. It is not allowed," said Mr Miller.

However, he did not address the apparent contradiction that while Gazprom may want to dictate transit terms to Turkey, Russia itself regularly re-exports gas to other countries from Turkmenistan in Central Asia.

Falling demand

The extent of Gazprom's sprawling pipelines was displayed on the giant coloured screen in Gazprom's Central Despatch Department, where supplies are tracked and despatched across the Russian Federation and to 30 other countries - a network of some 160,000km (100,000 miles).

A screen displays Gazprom's pipe network
Gazprom's vast network crosses thousands of miles

Excess gas is stored in 25 giant underground storage tanks.

The head of Central Despatch, Boris Kosyagin, admitted that the amount of gas which Gazprom had been able to sell in the last year had dropped significantly because of falling demand, both from Russian companies and abroad, in the wake of the global economic crisis.

He said the volume of gas being pumped had dropped by between 15% and 20%.

He said Gazprom had taken advantage of the slowdown to repair and update pipelines and to put greater investment into new gas fields and pipelines in Eastern Siberia and the Far East, with an eye to increasing supplies to the Asian market.

He said that over the next three years the aim was to link up pipelines supplying Western Russia and Europe to those being built in the east, to create a single gas network across the whole Russian Federation.

But he admitted that several thousand kilometres of pipelines still had to be installed before that could be achieved.

In a later meeting, Russian Energy Minister Sergei Shmatko revealed that the significant drop in the consumption of European gas from Russia in the last year was causing concern.

He said the Russian government was trying to work out if this was only due to the economic crisis, or also because of the shift in policy in EU countries to promote energy efficiency and alternative suppliers.

He said that unlike Europe, Asian countries were prepared to be specific about how much Russian gas they would need in the future and were willing to sign up to long-term contracts.

And this was one reason why Russia had decided to develop Siberian and Far Eastern gas fields and make transit routes a higher priority.

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