Ukraine will struggle with its plan to boost natural gas imports from Europe, leaving the nation with limited options to meet demand this winter after more than four months without gas from Russia.

European Union nations probably won’t supply enough gas via so-called reverse flows to meet Ukraine’s demand and exports would stop if there were shortages in the bloc, the Oxford Institute of Energy Studies said Oct. 27. Ukraine, Russia and EU talks in Brussels today are unlikely to bring an accord to restore supply from Russia halted since June 16, Ukraine Finance Minister Oleksandr Shlapak said yesterday.

Ukraine is working with Europe to boost deliveries from Slovakia as it seeks to meet the shortfall, according to Andriy Kobolyev, chief executive officer of NAK Naftogaz Ukrainy. Russia’s OAO Gazprom, which says Ukraine owes it $5.3 billion for past supply and that reverse flows violate transit contracts, limited volumes to EU countries including Poland last month, reducing the bloc’s ability to sell fuel to Ukraine.

“The Ukrainians have always been too optimistic about getting more gas through reverse flows,” Thierry Bros, an analyst at Societe Generale SA in Paris, said yesterday by phone. “It’s not because you have the capacity that the gas will come. Russia has already showed that they can restrict flows to Ukraine by limiting gas delivered to countries like Poland and Hungary.”

Ukraine, which consumes 50 billion cubic meters (1.7 trillion cubic feet) of gas a year and produces about 18 billion, could suffer “serious energy shortages” unless it resolves its dispute with Russia or increases EU imports, the OIES said in a report. Reverse flows are limited to 15 billion cubic meters a year in 2014-15, it said.

‘Easiest Solution’

“The easiest solution for all of us would be to unlock full reverse flows from Slovakia” to meet the shortfall of 5 billion cubic meters this winter, Kobolyev said in an interview at the FT European Gas Conference on Oct. 23. That would help Ukraine and create a “separate route” of gas supply to some eastern European countries that may be affected the most if there’s a cut off of Russian gas to Europe, he said.

Ukraine is already receiving gas from Slovakia via a pipeline that was previously not being utilized. Flows are currently at about 27 million cubic meters a day, or at maximum capacity, Kobolyev said. The fact the gas is flowing from Slovakia at maximum capacity “is going some way to alleviate concerns,” Citigroup Inc. analysts including Christopher Main said in a report e-mailed yesterday.

Prior Disputes

Russia supplies about 30 percent of Europe’s gas, half of which through pipelines crossing Ukraine. Disputes between the two nations cut flows to Europe in 2006 and 2009 amid freezing weather. Most EU countries are well-prepared if there are disruptions, Vladimir Drebentsov, head of Russia and CIS economics at BP Plc, said today at the European Autumn Gas Conference in London.

“I don’t think the impact on European gas markets will be the same as we saw five years ago, in 2009,” he said. “I don’t think there will be a crisis.”

Yuri Prodan, Ukraine’s energy minister, will seek an interim deal when he meets his Russian counterpart Alexander Novak and EU Energy Commissioner Guenther Oettinger. There’s a 60 percent chance Russia and Ukraine won’t reach an agreement, according to New York-based risk consultants Eurasia Group.

Naftogaz says it has $3.1 billion to pay Russia and Ukraine asked the EU for a $2 billion loan to help pay its gas bill. The bloc is unlikely to provide the full amount, Eurasia said. Ukraine is still seeking more financing to buy gas this winter, Shlapak said.

Stockholm Court

“The Ukrainians don’t have a plan B and they don’t have the money,” Bros said. “$3.1 billion doesn’t pay for gas, it pays for part of the debt. They need Europe to pay for the gas and do we as Europeans agree to that?”

A temporary deal between Russia and Ukraine is needed as the parties seek arbitration at a Stockholm court, which will rule on the Naftogaz-Gazprom dispute over prices in a process the Ukrainian company says won’t last less than a year.

“There are just two options, we cannot create new pipelines in one year,” Kobolyev said. “There’s either an agreement, or a solution in Stockholm with Gazprom, or there’s full reverse flows from Europe. There’s no other option.”

A change in EU leadership and last weekend’s elections in Ukraine may also prevent a deal from being reached today, said Bros. The European Commission will be replaced Nov. 1, with Miguel Arias Canete taking over from Oettinger. Pro-EU Ukrainian parties are trying to forge a coalition after parliamentary elections.

“The people who are leading the Commission today aren’t the ones that will be there tomorrow and the new Commission may have a different view,” Bros said. “Ukraine could also see a government reshuffle after the elections, so who would want to sign a deal with someone who may not be in power the next day?”