Ukraine will not extend its 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 look for alternatives.
After the war in Ukraine, Norway overtook Russia to become Europe’s largest gas supplier, and the EU increased imports of liquefied natural gas (LNG) from the United States and other countries.
WHAT IS THE GAS TRANSIT ROUTE OF UKRAINE?
Ukraine’s gas transit route, agreed by Moscow and Kiev in 2019, allows Russia to export gas to Europe via Ukraine. However, transit volumes fell by 28.5% in 2023, according to the Ukrainian pipeline operator.
There are two entry points: Sokhranivka and Sudzha, but Ukraine declared force majeure and stopped flows through Sokhranivka in 2022. The system connects Poland, Slovakia, Hungary, Romania and Moldova.
WHICH COUNTRIES RECEIVE GAS THROUGH THE ROUTE?
Most EU countries have reduced their dependence on Russian gas due to the invasion of Ukraine. The former main recipients of gas through Ukraine are Austria, Slovakia, Italy, Hungary, Croatia, Slovenia and Moldova. Austria still receives most of its gas through Ukraine, while other countries have diversified their sources and taken measures to reduce demand.
Moldova, one of Europe’s poorest countries, sourced all its gas from European markets last year, leaving Gazprom’s gas available for its separate eastern region, Transdniestria.
Croatia’s imports are now minimal and Slovenia’s have fallen to almost zero after its main gas supplier Geoplin’s contract with Gazprom ended last year, according to a study by Columbia University’s Center on Global Energy Policy.
HOW TO REPLACE GAS THROUGH UKRAINE?
Alternative sources of supply exist, European Energy Commissioner Kadri Simson said, an analysis showed.
Austria can import from Italy and Germany, and its utilities said they had taken precautionary measures in case of disruption to supplies of Russian gas.
Hungary relies on the TurkStream pipeline, while Slovenia receives gas from Algeria and other sources.
Slovak gas supplier SPP said a consortium of European gas buyers could take over 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 through TurkStream, Bulgaria, Serbia or Hungary. However, capacity across these routes is limited, SPP told Reuters.
Italy receives most of its gas through a route that facilitates imports of Azeri and Algerian gas.
WHAT HAPPENS TO UKRAINE’S GAS TRANSIT NETWORK?
Since 2015, Ukraine no longer imports gas directly from Russia, but uses the transit system to supply homes and businesses. The system maintains pressure levels for European and national supplies.
Ukraine has experience dealing with transit disruptions – such as those in 2006 and 2009 – and has tested the system to ensure it can work in the event of a supply disruption from Russia.
Ukrainian energy officials and industry sources have repeatedly said the transit disruption poses no threat to Ukraine, saying Ukrainian compressors could pump gas from storage facilities in the west to the east.
HOW MUCH REVENUE WILL GAZPROM LOSE?
Russia could lose about $4.5 billion a year if exports are disrupted, based on a projected average gas price for Europe of $320 per 1,000 cubic meters in 2025. Its daily exports through l ‘Ukraine to Europe are currently more than 40 million cubic meters, according to data from Gazprom.
WHAT CAN GAZPROM DO WITH GAS?
If Ukraine does not extend the deal, Russia plans to use alternative routes and increase LNG exports. Gazprom aims to increase gas sales to China.
Gazprom started gas flows to China through the Power of Siberia pipeline in late 2019, aiming to export 38 billion cubic meters (bcm) starting next year, and eventually up to 100 bcm per year. year, including 50 bcm through the proposed Power of Siberia 2 pipeline, but negotiations over price and other issues have stalled.
