Gazprom Faces Hard Choices: Naftogaz Ukrainy
The Russian gas pipeline monopoly Gazprom will not manage to complete Nord Stream 2 by the start of next year, forcing it to either cut its exports to Europe or to reach a new transit agreement with Naftogaz Ukrainy that satisfies EU terms and conditions, the CEO of the integrated Ukrainian monopoly Naftogaz said March 29. And without TurkStream 2 it will not even be able to meet its minimum contractual supply volume, said Andrei Kobolev.
It emerged last week that Denmark was unlikely to approve the plan to build NS 2 across its territorial waters, asking the Russian company instead to propose a newly-available route that goes south of Bornholm. This would mean a delay while the company prepared the necessary paperwork for Danish consideration. It already had a Plan B in the shape of a northwest route and two routes are needed.
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Kobolev told Ukrinform that what had happened in Denmark was far from a ban on NS 2, but it did mean a major delay so that the consortium [sic] would not be able to meet the final date it had planned for. Gazprom, the sole owner of Nord Stream 2, will therefore have either to send as much gas to Europe by whatever other means possible; or renegotiate its transit contract with Ukraine, which expires at the end of this year, he said.
If European customers buy more LNG to replace Gazprom's gas, however, that would raise the wholesale gas price and could partly offset Gazprom's losses on volume, he said.
He said the latter option would be better, both for the reputation of gas as a non-politicised fuel; and for the two parties involved. The latter option also had two further options: a long term contract reserving capacity; or a short-term contract for a fixed tariff and guarantees of payment. Ukraine could not refuse this option, he said. The tariff will be higher but the contract will be just for one year or a half year.
Extending the existing contract is not an option, as it does not fit the framework of European Union network codes, he said.
Further talks between Ukraine, Russia and the European Union are due to take place in May.