Eastern Europe contemplates prospect of winter without gas.

Bloomberg: “As winter approaches, former Soviet satellite nations from Poland to Bulgaria are watching Russia and Ukraine’s stalled gas negotiations with growing trepidation.” “The lack of discernible progress is sending a collective shiver down the spine of Eastern Europe, which retains vivid memories of Russian energy cuts during unusually cold winters in 2006 and 2009. The ensuing shortages led to shuttered factories and a return to wood for heating and cooking in rural areas. Despite the two episodes, little has been done to diversify supplies within a region that remains highly dependent on energy delivery systems dating back to the Soviet era. ….If Moscow and Kiev don’t reach a compromise before winter and OAO Gazprom (GAZP) fails to restart supplies to its western neighbor, Ukraine may resort to siphoning off gas carried through its territory. As in 2009, that could prompt Russia to cut transit through Ukraine altogether, leaving parts of eastern Europe exposed to severe shortages. Poland, Hungary and especially the Balkan peninsula would be most affected, according to the so-called “stress tests” published by the European Union on Oct. 16. Connected to the old Soviet pipeline system that runs through Ukraine and Moldova, the Balkan countries rely on Russia for close to 100 percent of their needs. Moreover, they’re poorly connected with their neighbors and their underground storage isn’t sufficient to cover demand for the entire winter. ….Russia and Ukraine were scheduled to return to the table in Berlin earlier this week before Russia presented a last-minute demand for advance payments for future deliveries. That has deepened the worry of eastern European neighbors, following the talks closely, that the deal won’t get done. Relying fully on storage isn’t an option for some of the countries. While Serbia’s Banatski Dvor depot is full, it would last the country only about 40 days, according to the energy ministry. Bulgaria’s only facility also offers a buffer of only a few weeks and is still only 88 percent full. ….Across the EU gas storage facilities were 94 percent full yesterday, according to GTE. ….Liquefied natural gas, viewed as the most expensive solution, is an option for Poland andLithuania, both of which are building LNG terminals on the Baltic coast to receive gas, primarily from Qatar. Still, they will make only small difference this winter: while the Lithuanian station is scheduled to open in December, the Polish one won’t start receiving shipments until the middle of next year. Eastern Europe’s shortcomings stand in contrast to Germany, Gazprom’s largest customer in Europe, which has depended on Russian gas since the 1970s. The construction of Nord Stream, the direct link from Russia under the Baltic Sea, means that since 2011 Europe’s largest economy is largely insulated from disruptions to gas flows through Ukraine. In turn, Gazprom depends so much on revenue from Germany it’s keen to avoid breaks in supply there.”