By Vanessa Dezem

Ukrainian natural gas storage facilities are filling fast as the profit from buying fuel in the summer to sell in the winter soars on the prospect of supply disruptions.

The average injection rate at Ukrainian underground storage sites has climbed to 80 million cubic meters per day, or 60% higher than the same period last year, according to Sergiy Makogon, head of strategy and business development at Ukrtransgaz, Ukraine’s gas transmission operator.

“We see significant interest from international shippers in Ukrainian storage,” Makogon said by email. “We already have contracts with about 30 foreign shippers and we expect about 1 to 1.5 billion cubic meters to be stored by them by the end of October.”

With plentiful supplies in Europe after last winter’s mild weather, traders can buy gas now in Germany for about 10.50 euros per megawatt-hour and arrange to sell it this winter at about 19 euros. That’s the widest spread in at least five years.

“Many players are importing gas to Ukraine and injecting it in storage in order to hedge against the possibility of some supply disruptions from Russian transit next year,” said Klaus Reinisch, director of sales and trading at D.Trading, a unit of DTEK Group, one of Ukraine’s largest private energy companies. “But at the same time, gas storage is very profitable in itself now, since seasonal spreads are amazing and Ukrainian storage is by far the most abundant and lowest cost.”

East European nations, heavily dependent on Russian gas to generate electricity and for heating, are increasingly concerned about supply disruptions this winter when a gas transit agreement between Russia and Ukraine expires. The situation will get even worse if winter temperatures are unseasonably low, according to Borys Glavatskyi, head of the gas trading center at NAK Naftogaz Ukrainy.

The supply concerns have been aggravated by risk that Russia will fail to agree a transit accord with Ukraine and European Union intermediaries before the current deal expires at the end of the year. More than a third of Europe’s gas comes from Russia, and most of that goes through Ukraine’s Soviet-era pipelines.

Ukrainian gas storage system can technically be filled up at a maximum rate of about 250 million cubic meters per day, according to data from Ukrtransgaz. Ukraine currently has 12.8 billion cubic meters stored.

Ukraine proposed to the EU that it can store 3 to 4 billion cubic meters more in Ukrainian underground gas storage sites to guarantee the security of gas supply to Eastern European countries.

“The main idea is to create a strategic stock for Eastern European countries now, which currently receive gas via Ukraine, and be fully ready for any unexpected situations in January, rather than try to resolve a crisis if it happens,” said Makogon at Ukrtransgaz.