Norway has no extra gas for Europe

StatoilHydro cannot increase gas production to compensate for threatened Russian supply disruptions.

Ukraine's pipeline network is the second-largest exporter to Europe.

Norway's StatoilHydro is unable to increase gas production to compensate for a shortfall from Russia, deepening European concerns about gas shortages next month if Russia were to make good on threats to disrupt supply over a contract dispute with Ukraine. "In winter, we are more or less at full capacity. If there is a higher demand, we cannot really produce more," said Ola Morten Aanestad, a company spokesman. Norway is the second-largest exporter of gas to Europe, supplying about 15 per cent of the continent's needs, compared with 25 per cent from Russia. On Saturday, the Russian state-controlled gas monopoly Gazprom reiterated warnings that a pricing dispute with Ukraine could disrupt gas supplies to Europe. The chance that Russia would cut off supplies to Ukraine on Jan 1 was about "50-50", the Gazprom spokesman, Sergei Kupriyanov, told the Russian radio station Moscow Echo. If that happened, Gazprom would not be able to prevent the "unsanctioned" diversion of gas supplies bound for Europe, and Ukrainians would "just keep burning gas in their stoves", he said. Ukraine is the most important transit state for Russian gas flowing to Europe, with about 80 per cent of those supplies passing through Ukrainian pipelines. The two former Soviet neighbours have been locked in negotiations to reach a last-minute resolution of their conflict over the renewal of a gas supply contract that expires on Wednesday. Gazprom claims Ukraine's state gas company, Naftogaz, owes it more than US$2 billion (Dh7.3bn) for gas delivered in the past two months. It said Kiev had warned it would not be able to repay the debt by the Russian end-of-year deadline. Gazprom's repeated warnings about impending supply cuts are unnerving to European countries worried about a replay of the gas crisis that unfolded in Jan 2006, when Ukraine siphoned off gas intended for other European states after Gazprom cut deliveries to its neighbour. The midwinter disruption sent up gas prices on the European spot market. The Russian president, Dmitry Medvedev, recently threatened to sanction Ukraine if its debt to Gazprom was not settled "to the last rouble". He said relations with Ukraine had reached a low point, and that the country "lacks efficient leadership". Ukraine has angered Moscow with pro-western policies that have included seeking to join Nato and supporting Georgia in that country's recent war with Russia. Kiev is scrambling to find the money to pay Gazprom amid a severe financial and economic crisis and political turmoil that has pitted the Ukrainian president, Viktor Yushchenko, against the country's prime minister, Yulia Timoshenko. Ukrainian officials have accused Moscow of exploiting the situation by trying to force the country to surrender control of its pipeline network. Gazprom suggested that Ukraine might avoid having its gas supply cut off by agreeing to settle its debt through deductions from future gas transit fees. [e-mail]