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. Last Updated: 07/27/2016

Kamchatka Faces Full Power Outage

The 300,000 residents of Kamchatka could be without electricity or heat Tuesday if a debt dispute between Kamchatskenergo, the Far East region's only utility, and state-owned oil major Rosneft isn't resolved.

National power grid Unified Energy Systems, which owns Kamchatskenergo, said Friday that the region only had four days worth of fuel reserves and that Rosneft, its sole supplier, had frozen shipments until a deal is reached on the 1.587 billion rubles ($52 million) it is owed.

Included in the shipment freeze is a tanker containing 15,000 tons of fuel oil — enough to power Kamchatskenergo for 15 days — that has been sitting in Kamchatka's Pacific port of Petropavlovsk-Kamchatsky for more than a week. Rosneft has refused to release it despite the fact that Kamchatskenergo has already paid for it.

Rosneft spokesman Alexander Stepanenko said Friday that his company was "insisting on guarantees for settling the debt" before it would allow the fuel to be offloaded. He said Kamchatskenergo had not only refused to pay its debts, but had refused to even give guarantees that it would do so. He said that no more fuel would be delivered until Kamchatskenergo "at least starts to pay back its debt."

UES complained in a press release that Rosneft was taking advantage of being the "monopoly" supplier to Kamchatskenergo.

In its own release, Rosneft countered that the utility "always had the possibility to use other suppliers" and accused it of wanting to rely on Rosneft because of its status as a state-owned company.

Kamchatka is designated a federal subsidy region because it can't make ends meet on its own and the state has often ordered Rosneft to supply the region with fuel oil despite nonpayments.

"[Kamchatskenergo] is using Rosneft as a milk cow," Rosneft said.

A spokesman for the Energy Ministry, Yury Nogotkov, said that during winter, when the heating and electricity supply is a matter of life and death, Rosneft is "given the command to supply."

"Do you think [Rosneft] is dying to supply Kamchatka?" Nogotov said. "It wants to supply Korea, but it is forced to turn to Kamchatka."

"We keeping trying to prove to the Finance Ministry that the existing subsidy is not enough to provide the region with fuel, but without success," said Ladyshev, advisor to the Kamchatka governor. "If the regional administration and the Finance Ministry do not come to an agreement next year, the problem will snowball," he said.

Kamchatksenergo, like many UES subsidiaries, has a poor record of collecting what consumers owe it. While it owes $52 million to its supplier, it is owed $86 million — mostly from various branches of the federal and regional governments — according to UES.

And money that it does collect doesn't go toward paying off its debts, but to buy more fuel to stay online.

In a move that outraged Rosneft, for example, the Defense Ministry paid Kamchatskenergo $5.5 million last month, money that the utility used to purchase fuel from Rosneft rival LUKoil.

A tanker carrying 5,000 tons of fuel bought from LUKoil is scheduled to arrive in Kamchatka on Wednesday, but that amount is only enough to power the region for five days.

"[Kamchatskenergo] is undergoing a tough power economy effort," UES spokesman Yury Melekhov said.

Melekhov said that UES was looking for alternative sources of fuel in the area because a "provocation from Rosneft can happen any time."

Centered between the Sea of Okhotsk, the Bering Sea and the Pacific Ocean, the Kamchatka peninsula has numerous fuel alternatives to oil, including deep rivers for hydroelectric power, geysers for geothermal power, strong winds and newly found gas deposits.

The Energy Ministry's Nogotkov said that a geothermal station is currently being built jointly by UES, Gazprom, the regional administration and the European Bank for Reconstruction and Development, which has earmarked about $100 million for the project.