Ukraine hopes to import gas via Transbalkan pipeline at lower transit fee

By Pavel Polityuk and Yuliia Dysa

KYIV (Reuters) -Ukraine's energy regulator has approved a gas import mechanism that will avoid high transit fees when supplying gas through the Transbalkan pipeline from Greece to Ukraine, the Ukrainian energy ministry said on Tuesday.

Ukraine has faced a serious gas shortage since a series of devastating Russian missile strikes this year, which significantly reduced domestic gas production.

Ukraine now imports gas via Slovakia and Hungary, but does not use the southern route because of its higher transit tariffs, as gas from LNG terminals in Greece also passes through Bulgaria, Romania and Moldova.

"The Transbalkan route has significant potential to meet Ukraine's immediate needs ... however, this route passes through five countries, and the direct application of regulated tariffs makes it commercially unattractive compared to alternative options," the ministry said in a statement.

The ministry noted gas transit operators of five countries had "developed an optimised solution that will, in particular, allow the use of the currently unused capacity of the Transbalkan pipeline to import gas to Ukraine at a competitive tariff."

The ministry gave no more details, but added that it hopes for positive decisions from all participating countries on the use of the route.

The Kyiv government has said Ukraine needs to import at least 4 billion cubic metres (bcm) of gas for the new 2025/26 heating season while analysts and former officials estimated the imports at about 6.3 bcm.

Ukraine's state firm Naftogaz has already started buying, having contracted 300 million cubic metres (mcm) of U.S. LNG from Poland's Orlen, whose supplies go through Poland.

The Polish and Lithuanian routes were the cheapest, but Ukraine would also have to use other pipelines as the Polish interconnector allows the import of only up to 7 mcm per day, compared with demand of at least 25 mcm.

Ukraine plans to import about 20 mcm of gas from Slovakia, Poland and Hungary on Tuesday.

"Having abandoned Russian energy supplies, Ukraine, like our partners in the EU, is actively working to find alternative gas supply routes. The use of the Transbalkan route is important in this context," Ukraine's energy minister German Galushchenko said in a statement.

(Reporting by Yuliia Dysa and Pavel PolityukEditing by David Goodman and David Evans)