Wednesday, September 23, 2020
Home Oil & Gas Ukraine and Hungary to launch virtual gas reverse flow

Ukraine and Hungary to launch virtual gas reverse flow

Ukrainian and Hungarian gas transmission system operators established the virtual interconnection point (VIP) Bereg on the Ukraine-Hungary border, that will enable virtual natural gas reverse flow from May, 1. The agreement comes after the newly-established Ukrainian gas grid operator stated its intentions to undertake mergers of its western border interconnection points in a bid to streamline operations and deepen regional market integration.

Following three months of intensive negotiations and setting up the required regulatory framework, the Gas Transmission System Operator of Ukraine (GTSOU) and the Hungarian transmission system operator FGSZ concluded an agreement on uniting the existing two interconnection points – IP Beregovo DN1400 and IP Beregdaróc DN800 – into one single virtual interconnection point– VIP Bereg.

The integration of the existing physical interconnection points is one of the last provisions set out by the Network Code for Capacity Allocation Mechanisms (NC CAM) of the EU’s Third Energy Package. In the case of Ukraine and Hungary, this became possible only in this year, as of 1 January 2020 the same business rules apply on both physical interconnection points – Beregovo and Beregdaróc.

With the introduction of backhaul through the merging of the existing interconnection points, current capacity will expand significantly. According to Argus Media, the monthly capacity auction result at Beregdaróc (around 88 GWh/d of monthly capacity was sold on 28 April on top of an earlier 106.4 GWh/d of second-quarter capacity in an auction last month) was the highest at the point since at least November 2018 and left booked capacity close to the point’s current capacity of 206.7 GWh/d, which is expected to rise to almost 975 GWh/d from 1 May.

“Interconnection points which had been booked for the transit of Russian gas under a previous legacy contract and border points which have been used for imports of gas into Ukraine from Hungary, Poland and Slovakia may be merged into virtual interconnectIon points (VIPs),” General Manager of GTSO Sergiy Makogon stated earlier this year.

A similar virtual interconnection point is planned to be established between on the Polish – Ukrainian border at Drozdovichi-Hermanowice by June with negotiations already underway between Poland’s Gaz-System and GTSOU.

Virtual gas reverse flow started to operate on the Ukraine-Slovakia border at the Velke Kapusany/Uzhgorod point on March,1. GTSOU and Eustream also intend to merge the Budince and Velke Kapusany points into a VIP.

Ukraine couldn’t use these points for reverse flows and had to operate double interconnection points on its border with Hungary, Slovakia and Poland under the terms of its 10-year contract with Russian Gazprom, which blocked these point for transit to Europe. However, the new five-year contract at the end of last year was signed with Gazprom based on EU rules, and GTSOU concluded interconnection agreements for 13 out of its 24 interconnection points with the possibility to establish VIPs to facilitate flexible hub-to-hub trading.

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