In the event of a complete stoppage in Russian natural gas transit via Ukraine, Europe will experience a gas deficit of as much as 56 billion cu m (bcm) during 2014, said Moody’s Investors Service in a recent Global Credit Research report. Such a shortfall would predominantly affect Italy, Turkey, France, the Czech Republic, Slovakia, and Austria.
Warmer weather conditions, however, seasonal reductions in demand, and relatively high current gas stockpiles would to an extent mitigate the negative effects, Moody’s said. Ukraine also officially confirmed earlier this week that it would deliver gas to Europe under its 11-year transit agreement with Gazprom signed in 2009.
The evolving situation in Ukraine adds uncertainty to the reliability of Gazprom’s natural gas exports via Ukraine’s 143 bcm/year Soviet-era pipeline network, which connects Gazprom’s gas transportation system with the European gas network in Poland, Slovakia, Hungary, Romania, and Moldova, said Moody’s. Prolonged turmoil could also reduce Gazprom’s exports to Ukraine itself.
In 2013, gas transmission via Ukraine totaled 84 bcm/year, or 52% of Gazprom's exports to Europe, according to Moody’s. Gazprom will redirect up to 23 bcm of its export volumes to Nord Stream (55 bcm/year transmission capacity) starting this year, as its offshoot Nordeuropaische Erdgasleitung (NEL) pipeline comes fully on stream. Load tests on Nord Stream and NEL were completed in December.
On other routes only incremental additions to pipeline capacity are possible, said Moody’s. The Yamal-Russia pipeline through Belarus can increase to 33 bcm/year from 32 bcm/year, while Blue Stream, crossing the Black Sea to Turkey, can rise to 16 bcm/year from 13.6 bcm/year.
Gazprom has significantly reduced its dependence on the Ukrainian transit system since 1990, when nearly 90% of its exports travelled through Ukraine, Moody’s said. The South Stream pipeline will ultimately allow Gazprom to fully bypass Ukraine, should this be necessary. Gazprom plans to begin deliveries on one 15-bcm/year string of South Stream by yearend 2015 (OGJ, Feb. 3, 2014, p. 97), with a second string bringing capacity to 30 bcm/year in 2016. The company plans to begin building South Stream’s offshore segment this autumn and to have all 63 bcm/year in service by late 2017.
Although there has been no evidence of gas supply disruptions yet, Moody's anticipates that Gazprom will accelerate investment in South Stream and defer implementation of other projects, such as the Power of Siberia pipeline project (OGJ Online, Dec. 19, 2013), designed to deliver gas to China from eastern Siberia.
Moody’s also noted that European countries will likely try to maintain an uninterrupted gas supply from Gazprom which provides nearly one third of Europe’s gas imports (Europe imports nearly 50% of its gas), half of which is routed via Ukraine. This supply, said Moody’s, cannot be easily and cost-effectively substituted.
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