Hungary is Ukraine's main gas re-export route

11/12/2020 08:52 Natural Gas


Hungary has been the main destination for gas re-exported from Ukrainian storages since the start of November.

Re-exports to the EU from Ukraine were 5.2mn m³/d on 1-8 December, of which 3.81mn m³/d was taken to Hungary and the rest to Poland. This was just up from 5.08mn m³/d in all of November, when Hungary received 3.79mn m³/d and Poland took the rest.


The gas shipped to the EU had been held in Ukrainian storage sites under the customs-free warehouse regime, which allows firms to keep gas in storage for up to three years without paying taxes or customs duties as long as it is subsequently re-exported back to neighbouring markets.


But much of the customs-free gas stocks withdrawn last month were sold on the domestic market rather than being re-exported.


Non-resident firms held 9bn m³ in Ukrainian facilities as of 1 December, of which 5.4bn m³ had been imported using the short-haul programme.


This was 1bn m³ lower than a month earlier, with 400mn m³ less under the short-haul regime. Only 152.4mn m³ was re-exported to the EU last month, but some of this may have been transferred to resident firms. Aggregate customs-free stocks fell by about 1.2bn m³ and short-haul delivered gas fell by 285mn m³.


Resident firms held about 1bn m³ under the customs-free programme as of 1 December, of which 500mn m³ had been imported using the short-haul programme.


Firms using the customs-exempt storage programme would have to pay customs duties if they sell the gas on the domestic market, and non-resident firms cannot operate in Ukraine's VTP market area. But EU firms can sell the gas on to Ukrainian companies, which then deliver the supply to end users, saving non-resident firms from paying 20pc value-added tax (VAT) on sales.


Re-exports this month are expected to exceed November's, market participants told Argus. But some gas could continue to be sold on the domestic market if there is an economic incentive for it, they said.

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