Transit under fire: what will happen to Russian gas supplies to the EU
On May 10, the GTS Operator of Ukraine announced a force majeure and suspension of the transit of Russian gas through the Soyuz gas pipeline, which passes through the Sokhranovka gas measuring station (GIS). The reason was the loss of Ukrainian control over the territory where the station is located. And although Gazprom did not agree with the outcome of the Ukrainian operator, transit along this route was stopped. Now Russian gas supplies through Ukraine go only through the Urengoy-Pomary-Uzhgorod gas pipeline, which remains under the full control of the Ukrainian side.
What will happen to the transit of Russian gas further, including in the light of possible events: stopping the use in Poland and Bulgaria and nationalizing companies in Europe by Gazprom?
Deviation from the route
In 2019, Naftogaz Ukrainy and Gazprom announce another gas export to Russia, assuming the transportation of 65 billion cubic meters in 2019 and up to 40 billion cubic meters starting from 2020. The contract was drawn up according to the “pump or pay” formula and provided for the unconditional payment of the legal volume of transit. 70% of the transit was to pass through the main transit corridor – through the Urengoy-Pomary-Uzhgorod gas pipeline system (GIS Sudzha), 30% – through the Soyuz gas pipeline (GIS Sokhranovka). Gazprom assumes that in 2021-2022 it will be possible to load Nord Stream 2 and will use the Ukrainian route only in case of high demand in the European market. In turn, Naftogaz expected to conclude a new contract – at least for 10 years.
But after the start of the military “special operation”* of Russia in Ukraine, there was a disappearance. Germany refused to launch Nord Stream 2, and the countries of Central and Eastern Europe began to look for opportunities to increase demand for gas from other countries. Nevertheless, less gas exports from Russia in March-April are stably stable – at the level of 220-250 million cubic meters per day (excluding the use of the Turkish Stream), and the Ukrainian route is in demand. In early May, transit through the Ukrainian GTS even increased to 85-90 million cubic meters per day, approaching the contracted volume (110 million cubic meters per day). But this did not last long: after the stoppage of gas intake through the Conservation, transit dropped to 55-65 million cubic meters and was probably reached, approaching the February lows (25-30 million cubic meters per day).
The market reaction was restrained – gas prices increased by 14% (up to $1,170 per thousand cubic meters). A year ago, such prices were considered record-breaking, and a partial stop in transit through Ukraine would have caused panic among consumers, but over the past three months, buyers have become accustomed to bad news. The relatively low demand of the European market currently consumes low demand for gas – due to the transition to coal and other energy carriers, and also reduces thermal weather. As a result, Gazprom can use all buyers’ orders even if the capture of the Ukrainian GTS is limited, the Ukrainian operator can not use the capacity of the Soyuz gas pipeline.
But the decommissioned Preservation is unlikely to be found for transit. On May 11, the Russian authorities imposed sanctions against European gas companies, among which were EuRoPol Gaz, the operator of the Polish section of the Yamal-Europe gas pipeline. The long-term contract for the transit of Russian gas through this gas pipeline expired back in 2020, and over time, Gazprom booked the capacity of the gas pipeline on a short-term basis. In 2022, the Yamal-Europe gas pipeline, which for a long time was one of the main routes for Russian gas supplies to the EU, supplied only 1.3 billion cubic meters, that is, capacities were loaded by only 12%.
However, no less held accountable delayed opportunities for (if necessary) selection from Russia in the countries of Northwest Europe. Now Gazprom can use either Nord Stream 1 (which is already operating at full capacity) or the Ukrainian route. Available contracted transit capacity currently stands at approximately 230 million cubic meters per day (85 billion cubic meters per year), plus another 100 million cubic meters per day in the countries of Southern Europe (through the Turkish Stream). In the event that neither Russia nor the EU countries impose any restrictions on supplies, they may not be captured for the collection of food stocks in European underground gas storages (UGS) and for use during peak consumption in winter.
gas solitaire
Ukrainian GTS operator implementation on the readiness to increase transit through the Urengoy-Pomary-Uzhgorod gas pipeline through the Sudzha station, to massively increase flows to 100-110 million cubic meters per day. Gazprom refuses, stating that it is “technically impossible”. True, back in 2020, gas flows through Sudzha were observed above 100 million cubic meters per day, so Gazprom could probably increase the gas supply through the Sudzha, but this may not be profitable – maintaining transit through Sokhranovka allows Gazprom to use the capacity of the Soyuz gas pipeline, to conserve gas with these volumes may be difficult to transfer to the “Sudzhensky corridor”. In addition, Gazprom may have its own view on whether the situation is force majeure. Territories where the GIS “Sokhanovka” is located, have crossed under the control of the LPR more than a month ago, while the staff of the Ukrainian operator found the opportunity to work at the station as usual, and tracking at the operator made it possible to use all gas flows in the Ukrainian GTS.
In the coming weeks, Gazprom is likely to strictly follow the 2019 transit contract and not deliver transit through the Sudzha GIS. Problems may arise in the event of a sharp increase in applications from European consumers, but Gazprom is unlikely to face such problems in the coming months. The demand of European consumers will be affected not only by high gas prices, but also by Russia’s decision to switch to payments in rubles. Companies from Poland and Bulgaria have already abandoned the new procedure for calculating Russian gas, with a high probability of buying gas from Gazprom, a company from the Netherlands, the Czech Republic and other EU countries may be stopped. This means that the transit capacities currently available to Gazprom may be quite sufficient to fulfill consumer requests.
But even if demand is higher in Europe, there are plenty of options. Among them are gas sales (within the framework of spot meetings) at the exit from the Russian GTS, an increase in the probability through Belarus via the Gazprom Transgaz Belarus system, or the launch of Nord Stream 2. The last sentence looks incredible only at first glance. Numerous mutual restrictions imposed by the EU countries and Russia in recent months have not yet affected this project – the resolution against the “flow – 2” was adopted only in the United States. At the same time, the gas pipeline is completely ready for operation and can be launched within a week. In the current realities, such an impossible is revealed, but it is also impossible to predict what happens after six months of using Russia and applications.
The opinion of the editors may not coincide with the point of view of the author
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