Ukraine Faces 'Unprecedented' Energy Crisis

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland) - The International Energy Agency (IEA) has warned that Ukraine is facing its worst ever energy crisis as the conflict with Russia has impacted power supplies along with production from shale gas wells and coal mines.

"Ukraine is confronted with unprecedented challenges as it faces geopolitical, economic, financial, humanitarian and energy crises at the same time," the IEA warned its report: Energy Policies Beyond IEA Countries: Eastern Europe, Caucasus and Central Asia. The situation also threatens European gas supplies.

Ukraine is a vital transit country for Russia gas reaching the European Union (E.U.). One third of Europe's gas is supplied by Russia and around half of that comes through Ukraine. The armed conflict, instigated by Russia's backing of pro-Russian separatists in the Crimea region of Ukraine, has seen a suspension in gas supplies to the country. Matters deteriorated further this week when Russia Energy Minister, Alexander Novak, said it doesn't plan to renew its gas transit contract with Ukraine after it ends in 2019.

Russian gas giant, Gazprom (PINK:OGAZPY) (Moscow, Russia), also weighed in this week by warning Europe not to try and block its plans to build an alternative pipeline to Europe through Turkey, known as Turkish Stream.

CEO, Alexey Miller, said and attempts to block it would be "a very serious mistake" at an energy conference in Berlin. He blamed Europe for the cancelling of the giant South Stream Transport gas pipeline project last year. "First, all these volumes may go to other markets. Secondly I want to direct your attention to our competitive advantage - we can sustain a pause."

Russia's President, Vladimir Putin, cancelled South Stream in December blaming Bulgarian reluctance as well as European Union (E.U.) pressure. For additional information, see December 3, 2014, article - Russia Scraps South Stream Natural Gas Pipeline, Chooses New Route to Turkey.

In January, Gazprom bought up the 50% of shares it did not already own in the cancelled $40 billion South Stream project, which would have allowed Russian gas to enter Europe through Bulgaria. It agreed to buy the shares from its former partners including Italy's Eni SpA (Rome, Italy), Electricite de France (EDF) (Paris, France) and the Wintershall unit of Germany's BASF SE (XETRA: BAS) (Ludwigshafen, Germany) for an undisclosed sum. For additional information, see January 16, 2015, article - Gazprom Buys Out South Stream Pipeline Partners.

A month later, Gazprom announced the rival Turkish Stream natural gas pipeline, proposing that it will fund the construction of the sea section of the proposed pipeline. For additional information, see February 2, 2015, article - Turkey, Russia's Gas Giant OAO Gazprom Agree on New Gas Pipeline.

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