GO
Loading...

Ukraine situation of 'utmost importance' to gas supply

The unfolding crisis in Ukraine, which is locked in dispute with gas giant Gazprom over a bill due Monday morning, is of "utmost importance" to the world's natural gas market, according to the head of global body the International Gas Union.

Jerome Ferrier, president of the IGU and an executive of French power company Total, told CNBC he is "optimistic on the current situation," despite Ukraine's refusal so far to pay a $2.2 billion bill due Monday morning.

Read MoreUkraine's emergency talks with EU

Russia has hiked gas prices for Ukraine from $268 to $500 per cubic meter since the dispute over its annexation of the Crimea region of Ukraine erupted. Gazprom has threatened to claw back discounts made on gas already paid for, which has helped fuel the current stand-off over payment.

Mecky | Getty Images

"Even though Ukraine is struggling to pay, if it cuts off energy supplies to Ukraine, it suffers as well by losing receipts for sales, plus also further encouraging energy diversification," Tim Ash, head of emerging markets research at Standard Bank, pointed out.

"And, if it cut off gas supplies, it would arguably just rally Western support even more behind Ukraine, and against Moscow, increasing the chances of tighter sanctions being applied on Russia itself."

Read MorePro-Russia crowds storm Ukrainian government buildings

More broadly, there are real concerns that the dispute between Russia and Ukraine could disrupt natural gas supplies between Russia and Western Europe. Russia is Europe's biggest natural gas supplier, and some of that supply is delivered through pipelines running through Ukraine. Germany in particular is reliant on Russian gas to heat its houses and fuel industry.

Market prices leapt following the annexation last month, but are still lower than 2010 levels, due to warmer winters and some stockpiling of gas from earlier years.

Read MoreWhy we're upbeat on LNG

Ferrier's optimism may feel a bit unrealistic to some, after a weekend where pro-Russia protestors stormed government buildings in eastern Ukraine – the region geographically closest to Russia.

"What we can observe is that from the suppliers and buyers is that there are very strong commitments over a long period of time," Ferrier said.

He added that the IGU doesn't see a "short-term risk in supply to Western Europe."

Latest Special Reports

  • Tips on the best-performing portfolio strategies and global market trends that can help you become a smarter investor.

  • From family-run companies to public companies with family ownership, we tackle challenges and rewards facing family businesses.

  • Advisor-centric content with guest columns covering practice management, investment strategies and marketing/social media.