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    Choice of Export Route is for Russia to Make: Gazprom Adviser

Summary

Russia is a sovereign state and, as such, it has the right to choose the export routes to its customers that pose the least risk to its gas contracts,

by: William Powell

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Choice of Export Route is for Russia to Make: Gazprom Adviser

Russia is a sovereign state and, as such, it has the right to choose the export routes to its customers that pose the least risk to its gas contracts, Gazprom Export adviser Andrei Konoplyanik told the Central European Gas Congress in Bratislava on April 26.

As adviser to Gazprom Export, he can only informally propose ideas, while there is still time to hammer out an agreement that satisfies both the EC and Russia’s interests. 

The last speaker of the day, he followed numerous presentations where security of gas supply was cited as the main concern of central and east European Union member states. This was a theme of the keynote speech by Maros Sefcovic, the European Commissioner for the Energy Union.

Sharing the platform with Sefcovic was Viktor Zubkov, a special representative of Russia's president Vladimir Putin and also chairman of state export monopoly Gazprom's board of directors. "I did not write his speech," Konoplyanik told NGE, but I did recognise some of its ideas."

Breach of contract could expose Gazprom to commercial proceedings, Konoplyanik said, although he pointed out that after previous interruptions to its deliveries, in 2006 and more famously in 2009 when they stopped for several weeks in winter, its customers had fortunately not done this.

Gazprom has identified two routes to bring gas to Europe that avoid what it considers risky transit corridors: Ukraine and Turkey. He said Turkish Stream had been less risky than Ukraine, but still it was risky. But since last November, Turkey has no longer even been a transit option for Russian gas, he said.

He said there is now an opportunity to find alternatives to Ukraine. The two lines under discussion, South Stream and Nord Stream 2, would allow Russia to bring gas to its old delivery points, from north and south, keeping north, central and southern Europe supplied as before but using private capital, not EU funds.

Following the reunification of the Crimea and Russia, as he put it, Gazprom could build a shorter and shallower South Stream under the Black Sea from east to west, with no need for Turkey, and surfacing at Varna in Bulgaria. This would allow it to revive the scrapped Edison-led Poseidon project, a pipeline that surfaces in Italy.

Transit contract expires before supply contracts

Gazprom's transit contract with Ukraine expires in 2019, while many of its gas supply contracts persist for years after that date.

Why, he asked, would Russia continue with Ukraine transit if it considers it more risky and more costly than alternatives? Ukraine, he said, had threatened to increase transit fees by over a quarter from what they are now. The tariff network code is still being discussed, he said, but Russia had been given a clear message that the fees will increase.

Ukraine earns $2bn/yr from transit payments from Russia, he said. This money could instead be provided by the EU, if it were concerned about the economic fate of Ukraine. Russia has been excluded from any consortium operating Ukraine’s transit pipelines, he said. Or maybe Ukraine could earn money from leasing out capacity in its storage facilities – at over 32bn m³, they are Europe's largest.

A possibility that has been mooted after previous interruptions of flows is that Gazprom delivers all the gas that would have flowed through Ukraine to a point east of, or on its border with, Ukraine, leaving its customers responsible for its onward transport through Ukraine to their markets. That would eliminate transit risk in Ukraine, but this idea has not been in circulation much lately.

 

William Powell