banner
Apr 19, 2021
5 Views
0 0

Don’t pump and don’t pay: Ukraine lost the fight for gas transit to Europe

After the launch of all Russian transit gas pipelines, pumping through Ukraine will be reduced to a minimum. Blue fuel is already bypassing the Turkish Stream. Next in line are its new branches and the launch of Nord Stream 2. Experts state that while Naftogaz was playing politics, the Ukrainian gas transportation system almost collapsed, and there will soon be nothing to maintain the network.

Collapsed to a minimum

In 2020, Russian transit to Europe through the Ukrainian gas transportation system decreased by more than a third – to 55.8 billion cubic meters. This is the lowest figure in thirty years, and in previous years it was no less than 90 billion. As the head of the Ukrainian GTS Operator Sergei Makogon emphasized, even in the crisis of 2014, 62 billion were pumped, despite “all efforts of Gazprom to reduce gas supplies to the EU in order to prevent a reverse from Europe.”

The fall is truly record-breaking. With the design capacity of the GTS 146 billion, the load is less than 30 percent.

This happened for several reasons. There should have been 65 billion. However, due to the late signing of the agreement with Gazprom in the first quarter (especially in January and February), the physical flows of Russian exports were distributed without Ukrainian transit. In addition, a warm winter with quarantine reduced gas demand in Europe and Asia, dropping prices in the first half of the year. And Ukrainian transit is the most expensive option and is loaded on a leftover basis.

Get rid of transit

In 2021, the situation has not improved. In February, the pumping rate decreased by a quarter compared to January. After the completion of the construction of the Turkish Stream pipeline in Serbia and Bulgaria, Kiev, according to the Ukrainians themselves, will lose another ten to twelve billion cubic meters a year.

Gazprom is already sending gas to Serbia, Bosnia and Herzegovina via a new route: the Turkish Stream, then via the national gas transportation system of Bulgaria to Serbia and Bosnia and Herzegovina.

And this is just the beginning, Yuriy Korolchuk, co-founder of the Institute of Energy Strategies, warned in a review for the Ukrainian press. Kiev lost the fight for transit. After the launch of all Russian gas pipelines, pumping will be scanty. “The problems are not so much with Romania, but with Hungary and the Balkan countries, which will soon be able to take gas from reverse gas pipelines-interconnectors connecting Central-Eastern Europe with the Turkish Stream,” explained Korolchuk.

It is important for Kiev to prevent the commissioning of Nord Stream 2. Although, as noted by Korolchuk, in the position of Ukraine it is simply meaningless: “What happened with the gas transit is exclusively the fault of Naftogaz, because they took the political path and carry out certain political tasks for Nord Stream 2 instead of to at least try to influence the construction of the Turkish Stream, to which gas was pumped not so long ago. “

“Download or Pay”

In the coming years, the loss of transit does not threaten Ukraine with any particular troubles: the contract signed with Gazprom until 2024 provides for the “download or pay” principle. So, for example, the Russian monopolist paid for the capacities booked for 2020 in full.

“Because of the pandemic, they pumped over ten billion cubic meters less than they planned. But taking into account the “download or pay” norm, Gazprom has laid out more than $ 2.5 billion, “said Sergei Pikin, director of the Russian Energy Development Fund.

The contract with a minimum of 40 billion cubic meters is in force for another four years. However, further, when the pipe with a total capacity of 55 billion per year is launched, the scenario is pessimistic.

“By and large, Gazprom has only three consumers for whom it makes sense to transport blue fuel through Ukraine: Moldova, Romania and Hungary. Natural gas consumption in Moldova is relatively low – about one billion cubic meters per year. Romania can use the Turkish Stream and has a reverse gas pipeline connected to the south of Moldova. Only Hungary remains, but if the Balkan Stream branching off from the Turkish Stream reaches it, the need for Ukrainian transit will finally disappear, ”says Leonid Khazanov, an independent industrial expert.

Backup system

After the expiration of the contract with Gazprom, the Ukrainian GTS will become a backup system with a maximum loading of 20 billion cubic meters per year. But the revenues from transit so far allow Kiev to maintain the GTS in a working condition.

“Then it will be necessary either to conserve it and switch to the purchase of liquefied natural gas (our own production does not fully cover consumption), which is more expensive than pipeline gas, or to negotiate with Gazprom. Just expect preferential prices, given the debts of Naftogaz and Ukraine’s aggressive arty-Russian foreign policy, ”says Khazanov.

According to Korolchuk, the only option for increasing transit is to increase gas consumption in the EU from 450 to 500 billion cubic meters. This will give Ukraine a chance to pump at least 30 billion cubic meters. “But the question here is whether Russia wants to increase production or prefers LNG supplies, which it is actively increasing now. That is, one way or another, Kiev has already dropped out of the game, ”the analyst stated.

Russian experts also point out that even if transit is kept for some time longer for political reasons, Ukraine as an intermediary still has no future: the European market is changing rapidly. As a last resort, Russia will arrange supplies of LNG or even hydrogen fuel to Europe. And Ukraine has nothing to do with the dilapidated GTS.

Article Categories:
Politics
banner

Leave a Reply