What will happen when the Ukraine gas transit deal expires?
LONDON, June 4 (Reuters) - Ukraine will not extend a five-year deal with Russia's Gazprom on the transit of Russian gas to Europe when it expires at the end of the year, prompting recipient countries to seek alternatives.
Since the Ukraine war, Norway has overtaken Russia to become Europe's top pipeline gas supplier and the EU has increased liquefied natural gas (LNG) imports from the U.S. and other countries.
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WHAT IS THE UKRAINE GAS TRANSIT ROUTE?
The Ukraine gas transit route, agreed upon by Moscow and Kyiv in 2019, enables Russia to export gas to Europe to Ukraine. However, transit volumes dropped 28.5% in 2023, according to Ukraine’s gas pipeline operator.
Two entry points exist: Sokhranivka and Sudzha, but Ukraine declared force majeure and halted flows through Sokhranivka in 2022. The system connects Poland, Slovakia, Hungary, Romania, and Moldova.
WHICH COUNTRIES RECEIVE GAS VIA THE ROUTE?
Most EU nations have lessened their dependence on Russian gas due to the Ukraine invasion. Former main recipients of gas via Ukraine include Austria, Slovakia, Italy, Hungary, Croatia, Slovenia, and Moldova. Austria still receives most of its gas via Ukraine, while others have diversified their sources and taken steps to reduce demand.
Moldova, one of Europe's poorest countries, last year sourced all its gas from European markets, leaving available gas from Gazprom for its breakaway eastern region, Transdniestria.
Croatia's imports are now minimal and Slovenia's have dropped to near zero after its main gas supplier Geoplin's contract with Gazprom ended last year, a study by the Center on Global Energy Policy at Columbia University said.
HOW CAN GAS VIA UKRAINE BE REPLACED?
Alternative supply sources exist, EU energy commissioner Kadri Simson said an analysis has shown.
Austria can import from Italy and Germany, and its utilities have said they have taken precautionary measures if Russian gas supply stops.
Hungary has been relying on the TurkStream pipeline, and Slovenia gets its gas from Algeria and other sources.
Slovak gas supplier SPP said a consortium of European gas buyers could take over the gas on the Russia-Ukraine border when the transit contract expires.
Another option is for Gazprom to supply some of the gas via another route, for example via TurkStream, Bulgaria, Serbia or Hungary. However, capacity via these routes is limited, SPP told Reuters.
Italy receives most of its gas through a route which facilitates Azeri Gas imports and from Algeria.
WHAT HAPPENS TO UKRAINE'S GAS TRANSIT NETWORK?
Ukraine has not imported gas directly from Russia since 2015 but uses the transit system to supply homes and businesses. The system maintains pressure levels for both European and domestic supply.
Ukraine has experience in managing transit shutdowns - such as those in 2006 and 2009 - and has tested the system to ensure it can function if supply from Russia ceases.
Ukrainian energy officials and industry sources have repeatedly said there is no threat to Ukraine by stopping transit, saying Ukrainian compressors could pump gas from storage facilities in the west to the east.
HOW MUCH REVENUE WILL GAZPROM LOSE?
Russia could lose around $4.5 billion annually if exports halt, based on an expected average gas price to Europe of $320 per 1,000 cubic metres in 2025. Its daily exports via Ukraine to Europe currently stand at more than 40 million cubic metres, according to Gazprom's data.
WHAT CAN GAZPROM DO WITH THE GAS?
If Ukraine does not extend the deal, Russia plans to use alternative routes and increase LNG exports. Gazprom aims to boost gas sales to China.
Gazprom started gas flows to China via the Power of Siberia pipeline in late 2019, aiming to export 38 billion cubic metres (bcm) from next year, and eventually to as much as 100 bcm per year, including 50 bcm through the proposed Power of Siberia 2 pipeline, but negotiations on price and other issues have stalled.
(Reporting by Nina Chestney in London, Pavel Polityuk in Kyiv, Vladimir Soldatkin in Moscow, Alexandra Schwarz-Goerlich in Vienna, Jan Lopatka in Prague and Francesca Landini in Milan; Editing by Louise Heavens)