Winter blackouts threaten Ukraine amid Russian coal embargo

Winter blackouts threaten Ukraine amid Russian coal embargo
By bne IntelliNews November 26, 2015

Crucial coal supplies from Russia and from Ukraine's rebel-held Donbas region to Ukraine have stopped, following the cut-off of Ukrainian electricity supplies to the Russian-held Crimean peninsula on November 21. The halting of coal supplies threatens Ukraine with power blackout during the winter.

"We assume that Russia will take assymetric measures [against the blockade of Crimea]," a source in Ukraine's energy and coal ministry told Russian business daily Kommersant. The source added  that Ukraine's current coal stocks of 2mn tonnes would suffice for less than one month without replenishment.

"The customs are not letting through [to Ukraine] either thermal coal nor coking coal," a source in a Russian coal company told Kommersant

Russian-backed rebel authorities said on November 26 they had also stopped coal supplies to Kyiv-controlled territorites for an initial period of two weeks. "An embargo on coal supplies to Ukraine has been introduced provisionally for two weeks," Eduard Polyakov, an official in the rebel authorities in Donetsk region, told news agency rbc.ua.

Earlier, Ukraine's largest coal mining and power generation company DTEK said that its supplies of anthracite coal from the rebel-held territories had ceased.

Seven out of 14 coal-fired power plants operational in Ukraine burn anthracite coal, which is mined in Ukraine only in the eastern part of Donbas, currently occupied by the Russian-backed rebels.

In 2013, anthracite-burning power plants generated 21% of total Ukraine's electricity. Problems with anthracite supply decreased the capability of Ukraine's power plants to deliver enough electric capacity last winter and forced Ukraine to perform rolling blackouts.

Energy Minister Volodymyr Demschyshin stated earlier that Ukraine planned to buy 200mn tonnes of Russian coal per month as well as sourcing coal from South Africa. In September, Ukrainian thermal power plants burned about 5mmt of anthracite, one third of which was supplied from Russia.

"It won't be a problem for the Ukrainian energy system to get smoothly though this winter without Russian anthracite, if the anthracite is regularly supplied from the occupied territories of Donbas [held by Russian-backed insurgents]," writes Alexander Paraschiy, head of research at Kyiv brokerage Concorde Capital. "Unfortunately, such supplies are not secured, given that it's Russia that's the decision-maker on the occupied territories. Therefore, the risks of new blackouts in Ukraine this winter is increasing," he adds.

"As of [November 25], Ukraine's power plants had 944 kt of anthracite, according to the state power dispatcher. Such stockpiles are 2.7x bigger than a year ago, but still are too small to go through the winter season. They will be enough for power plants to operate only one month," Paraschiy adds.

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