UKRAINE GAS TRANSIT: WHAT’S AT STAKE
SPECIAL REPORT | 16 - 31 DEC. 2019 https://eurac.tv/9RaF
With the support of UKRAINE GAS TRANSIT: WHAT’S AT STAKE
SPECIAL REPORT | 16 - 31 DEC. 2019 https://eurac.tv/9RaF
By building the Nord Stream 2 and Turkish Stream gas pipelines, Russia is seeking to circumvent Ukraine for the transit of billions of cubic meters of gas bound to European countries. EURACTIV looks at the issues Europe faces with gas transit at its border. Contents
31 December 2019: Will gas stop flowing? 4
Ukraine and Russia: On-shore versus off-shore pipelines 7
Pipeline gas or LNG? Ukraine doesn’t keep all its eggs in one basket 10
As Ukraine unbundles its gas system, the architect speaks 12
Russia and Ukraine finalise gas deal just ahead of New Year deadline 14 4 16 - 31 DECEMBER 2019 | SPECIAL REPORT | UKRAINE GAS TRANSIT: WHAT’S AT STAKE | EURACTIV
31 December 2019: Will gas stop flowing?
By Georgi Gotev | EURACTIV.com
File photo. Computer boards display zero figures of gas transfer rate at the control room in the biggest heating plant east of Skopje, 8 January 2009., when the gas crisis broke. [Georgi Licovski/EPA/EFE]
he clock is ticking. The long- Time is running out to hammer out circumventing Ukraine: Nord Stream term gas transit contract an agreement, with relations tense 2, bringing gas to Germany under Tbetween Russia and Ukraine since Moscow annexed Crimea from the Baltic Sea, and Turkish Stream, expires on 31 December. Chances Ukraine in 2014. which will ship gas under the Black that the two sides could reach a Ukraine has been earning $3 Sea. The latter will tap into Balkan comprehensive agreement before billion a year from transit taxes and Stream, continuing on to Bulgaria, this date are slim. EURACTIV looks would like to preserve as much of Serbia, Hungary and Austria. behind the scenes of the dispute. this income as possible. Moreover, In recent years, Gazprom’s tactics the country has invested massively in gas transportation have been to Ukraine is a key transit route in its gas transport system and has load the existing pipelines bypassing for Russian gas to reach Europe. A made it profitable and in conformity Ukraine to maximum capacity, while current deal between the two post- with EU rules. the Ukrainian corridor was used to Soviet countries regulating gas In the meantime, Russia is transit expires at the end of the year. stepping up two big pipeline projects Continued on Page 5 16 - 31 DECEMBER 2019 | SPECIAL REPORT | UKRAINE GAS TRANSIT: WHAT’S AT STAKE | EURACTIV 5
Continued from Page 4 in time to avoid a disruption are slim, energy centre, a Russian think tank, not only because of the complexity estimates this need at 40 bcm/y, respond to demand fluctuations. of the talks, which involve contested while the Commission has put the Conversely, Ukraine stopped payments under litigation, but also figure at 60 bcm. Even at official buying gas from Russia since 2015. due to the interest of the Russian level Russia seems to accept that Imports are carried out by reverse side to see the gas prices grow in the some transit via Ukraine will remain. flow from European countries. There context of uncertainty. Gas storages are currently three reverse routes, in the EU are full like never before. IS A REMAKE OF THE 2009 the main route is the Slovak one GAS CRISIS POSSIBLE? (capacity of nearly 15 bcm/y). CAN NORD STREAM 2 Russia likes to make the sarcastic AND TURKISH STREAM Unlike in the winter of 2008- remark that gas from reverse flows is REPLACE THE UKRAINIAN 2009 when gas across Ukraine also Russian gas. Ukraine retorts that TRANSIT? stopped flowing, leaving several it is cheaper than the gas Gazprom EU countries in the cold (at least sells to Naftogaz. Gazprom had such an ambition, 11 people reportedly died, 10 of In the winter, Ukraine uses gas but for various reasons, Nord Stream them in Poland), in 2019, the EU is from its huge underground gas 2, with a planned capacity of 55 bcm/y, much better equipped to face such a storages (UGS), which have a huge is late and will not be operational challenge. potential also for clients in Western before mid-2020. Moreover, the Reportedly, gas storages in Europe. project, as well as Turkish Stream, is member countries have never been There are a number of obstacles likely to suffer from US sanctions. as full as now. However, it should to a comprehensive new deal, such The first pipe of Turkish Stream, be clear that in the absence of an as the political row between Kyiv and with a capacity of 15 bcm/y, is agreement, in the morning of 1 Moscow, a pro-Russian insurgency designed for the Turkish market. January, gas will stop flowing from in eastern Ukraine, and litigation Regarding the continuation of Russia into Ukraine. In such a case, between Russian gas supplier Turkish Stream into Bulgarian the consequences will be less heavy, Gazprom and Ukraine energy territory, under the name of Balkan but still important. company Naftogaz. Stream, the laying of the pipes is still Simon Schulte, head of gas The attempt by the previous ongoing. markets, Institute of Energy European Commission to mediate Gas flowing via the second Economics (EWI) at the University of in so-called “trilateral gas talks” offshore pipe of Turkish Stream Cologne, warns that a three-month has failed. Ukraine and Russia have (also 15 bcm/y) is aimed at supplying disruption would have serious continued lately on a bilateral track. Bulgaria, Serbia and Hungary, implications on gas prices. Prices will The issue was also discussed in Paris before the excess gas reaching the go up everywhere, but the countries on 9 December between Presidents Baumgarten gas hub near Vienna in South-Eastern Europe are likely to Volodymyr Zelenskiy and Vladimir (the same hub which used to receive be the most affected. [See report] Putin. gas transited via Ukraine). Ukraine’s transit has so far Commission Vice-President At this stage, it is impossible to stabilised prices in the EU during Maroš Šefčovič, who mediated in predict when the supplies via the demand peaks, as well as during the trilateral talks, has said that the Black Sea will reach Baumgarten and maintenance of Nord Stream and Commission proposed that Russia compensate for the missing Ukraine- of Yamal pipelines (once a year for and Ukraine conclude a transit transited supplies. each of them). The Ukrainian gas contract of at least 10 years with a It appears therefore that Russia transmission system, being very minimum 40-60 bcm/year ship- was unable to attain its goal: to be flexible, has no such interruptions. or-pay clause and the possibility to ready to supply the same amount The biggest potential impact is ship additional flexible volumes – of gas to clients in Europe by the on spot prices, which would jump between 20 and 30 bcm/year. two alternative pipelines, just in in the event of a cutoff. Depending In comparison, in the last couple time when the long-term gas transit on the length of the disruption, gas of years, more than 80 bcm/y were contract with Ukraine expires. flows also could be redirected and piped annually via the territory Moreover, even if and when Nord European demand for LNG could of Ukraine. Ukraine’s maximum Stream 2 and Balkan Stream are spike. capacity is more than 140 bcm/y. operational, there will still be a need The chances to reach an agreement to transit gas via Ukraine. Skolkovo Continued on Page 6 6 16 - 31 DECEMBER 2019 | SPECIAL REPORT | UKRAINE GAS TRANSIT: WHAT’S AT STAKE | EURACTIV
Continued from Page 5
BORISSOV: THERE WILL BE NO INTERRUPTION
Asked by EURACTIV on 13 December what will happen when the long-term gas transit deal between Russia and Ukraine expires on 31 December in the absence of agreement, Bulgarian Prime Minister Boyko Borissov was optimistic. “The transit of gas via Ukraine will not stop”, he said, adding that he had expressed the same view on the occasion of his recent meeting with Donald Trump in the White House, and at the EU summit the previous night. “Those dependent on the production of gas are the gas exporters. They are dependent on our money, on those invoices they are sending us and which we are paying. Will they renounce this? They won’t. Actually the opposite is true: more and more companies are trying to bring gas”, he said, alluding at the US LNG. Bulgaria has already imported LNG from the US, reportedly at prices lower than those the country pays for Russian pipeline gas. It is widely assumed that Russian authorities should know that it is not in their country’s interest to harm its image of a reliable gas supplier. However, with Russia entangled in so much power play in Europe and elsewhere, its leaders’ decisions are really hard to predict. 16 - 31 DECEMBER 2019 | SPECIAL REPORT | UKRAINE GAS TRANSIT: WHAT’S AT STAKE | EURACTIV 7
Ukraine and Russia: On-shore versus off-shore pipelines
By Georgi Gotev | EURACTIV.com
Nord Stream 2 pipeline installation in German waters [Nord Stream 2 website]
kraine’s national oil and gas To circumvent Ukraine, Moscow of Ukraine as a transit route, following company, Naftogaz, said on has launched the construction of the gas crisis in the winter of 2008- UMonday (16 December) that costly new offshore gas pipelines 2009. At that time, Russian President no agreement had yet been reached across the Baltic and the Black seas. Vladimir Putin proposed taking part over the transit of Russian gas through Ukraine, meanwhile, argues that in the privatisation of Ukraine’s gas Ukraine after 2019. As tensions grow, its own gas transportation system has transport system. EURACTIV looked at the details. improved hugely since the 2009 gas crisis. A BEAST FROM THE EAST “The parties continue negotiations The political agenda between at the level of experts as well as in Ukraine and Russia is lengthy and Ukraine chose another way. After the trilateral format mediated by the arguments concerning gas supply Russia’s annexation of Crimea in European Commission. The company and transit are often biased. But what February-March 2014 and the crisis [Naftogaz] will inform about any matters in the end for gas buyers in in Eastern Ukraine, still controlled agreements reached through official Europe is security of supply, price, and by pro-Russian paramilitaries, a new sources”, the statement reads. the impact of gas on policies to tackle team of managers led by Andriy The tug of war takes place amid climate change. Kobolyev started the transformation allegations by Russia that transit How do these considerations play of Naftogaz. via Ukraine has become unreliable in the case of on-shore and off-shore At that time, in 2014, Naftogas following a 2009 spat over transit pipelines? represented a risk for the country’s rules and prices that saw gas supplies On the Russian side, the dominant to Europe briefly interrupted. narrative builds on the negative image Continued on Page 8 8 16 - 31 DECEMBER 2019 | SPECIAL REPORT | UKRAINE GAS TRANSIT: WHAT’S AT STAKE | EURACTIV
Continued from Page 7 existing transit contract, Ukraine Gas bound for Germany via Nord decided to make the unbundling Stream 2 will be fed from the new sovereignty. It was the country’s largest legally effective after the expiry of the fields on the Yamal peninsula, where loss-making company, responsible existing transit contract. The Law on gas production in a permafrost for a $8 billion “black hole” in the unbundling was adopted by Ukraine’s environment is much costlier. state budget, and for 27% of national parliament on 31 October 2019, Likewise, he calls “dubious” the spending. Today Naftogaz is Ukraine’s meaning everything is now on track Russian claim that transporting gas largest taxpayer and the country’s for the new gas transmission operator through the existing Nord Stream 1 most profitable asset, with a net profit to start working as an independent pipeline is much cheaper than routing of $1.3 billion and contributing 15% of entity from 1 January 2020. it through Ukraine. the state’s budget revenue. But while Ukraine appears ready to According to Umbach, offshore In January-November 2019 alone, apply EU rules and continue playing its pipelines, given their greater cost, are Naftogaz contributed nearly 14% of role as the main gateway for Russian only cheaper at distances of 3,000 the state budget revenue. gas into the EU, Moscow is pursuing kilometres or less. Since the Yamal In line with the EU’s newly adopted other plans. fields are 4,300 kilometres from energy rules, Ukraine sought to align Russia has stepped up two big Germany’s Baltic coast, including its policies with Europe and break up pipeline projects circumventing the 1,200-kilometre Nord Stream national companies in charge of gas Ukraine: Nord Stream 2, bringing gas segment, this rule suggests that transport and generation activities – to Germany under the Baltic Sea, and imported North American or African the so-called “unbundling” rules. Turkish Stream, which will ship gas LNG – or certainly the Russian gas However, Ukraine’s attempt under the Black Sea. The latter will tap transited via Ukraine – could be to “unbundle” gas transport and into Balkan Stream, continuing on to cheaper than gas from Yamal. generation activities, although Bulgaria, Serbia, Hungary and Austria. Umbach also considers that required under EU law, was indirectly gas transitting via Nord Stream is blocked by Russia’s Gazprom. WHICH RUSSIAN GAS? currently heavily subsidised from As a party to a 2009 contract more profitable gas fields in Western Naftogaz had with Gazprom, the In a recent paper, Dr. Frank Siberia, suggesting this may not be consent from Russia was needed Umbach a German analyst at Global financially sustainable in the long run. to transfer competences to a new Intelligence Services (GIS) underlined The German analyst also points independent gas transmission that the gas Russia ships via Nord to climate change risks, related to the operator, Ukrtransgaz–UTG. Stream is not the same as that which is In order not to jeopardise the now being supplied via Ukraine. Continued on Page 9 16 - 31 DECEMBER 2019 | SPECIAL REPORT | UKRAINE GAS TRANSIT: WHAT’S AT STAKE | EURACTIV 9
Continued from Page 8 price, which decreased to record low the old Ukrainian route, but nothing meanwhile, and secondly to a higher similar on the side of Nord Stream 1 melting permafrost on which onshore duration, far beyond 2030”, Umbach and 2. If the Ukrainian route is not sections leading to Nord Stream 2 are said. used sufficiently, this, implies security located. “The investments in Yamal have risks for the European side, he said. been made in 2002, going up to $250 Danila Bochkarev, a Senior Fellow FINANCIAL AND billion, according to some estimates, at the EastWest Institute, took a ECOLOGICAL RISKS and if you add $40-50 billion for different view concerning the security building the new pipeline from Yamal of on-shore and off-shore pipelines, Speaking to EURACTIV on Monday to St. Petersburg, this kind of decision which he considers equally reliable. (16 December), Umbach raised the cannot be rectified”, he said. On the account of the carbon issue of the EU’s official climate policy, Regarding the melting permafrost, footprint, he evaluates the older which is based on the assumption that Umbach said that increased risk and Ukrainian corridor at a 60% higher conventional natural gas should be costs have upset the Russian planning, carbon footprint, compared to the reduced after 2030. not to mention the huge emissions same amount of gas shipped via Nord His argument is that the two of methane freed in the atmosphere. Stream 1. Russian assumptions for building In his words, Russia has invested Russian President Vladimir Putin Nord Stream 2 proved wrong. “nothing” in the maintenance of its and his German counterpart Angela Recalling a meeting in which he old pipelines leading to the traditional Merkel discussed the Nord Stream-2 participated in Berlin a year ago, Ukrainian route. natural gas pipeline to Germany and he said that Klaus-Dieter Borchard, Asked if offshore pipelines could be the transit of Russian gas to Europe via deputy director-general for energy at repaired in case of need, Umbach said Ukraine in a phone call on Monday, the the European Commission, made this it was more risky and time-consuming Kremlin said on Tuesday. point to representatives of the German than dealing with conventional gas industry, and to a representative of pipelines. Rosneft, the leader of the Russian oil “Repairing a land pipeline, of sector and the largest global public oil course it depends of the kind of and gas corporation. damage, takes 3 or 4 days, and The Rosneft representative “was according to estimates repairing an obviously shocked, because the offshore pipeline takes weeks”, he commerciality of Nord Stream 2 was said, adding that another aspect were based was firstly on a much higher gas the huge underground storages along 10 16 - 31 DECEMBER 2019 | SPECIAL REPORT | UKRAINE GAS TRANSIT: WHAT’S AT STAKE | EURACTIV
Pipeline gas or LNG? Ukraine doesn’t keep all its eggs in one basket
By Georgi Gotev | EURACTIV.com
The LPG Tanker vessel ‘Al Nuaman’ with Qatari LNG enters the LNG Terminal Port in Swinoujscie, Poland, 11 December 2015. [Tomek Muranski/EPA/EFE]
kraine has for decades counted the country’s export capacity to 112 which were not disclosed. But as exclusively on Russian bcm/y as of 2020, more than doubling energy minister Temenujka Petkova Upipeline gas, for its own use the capacity in just 18 months. said, they were lower than what the and for the lucrative transit taxes. But According to the International country pays for Russian pipeline gas. the tensions with Russia after 2014 and Energy Agency, in 2018, Europe saved Imports from the US are expected the low prices of LNG have changed $8 billion on its natural gas bills to grow substantially, after Bulgaria the paradigm completely. thanks to the import of US LNG. This and Greece complete in 2020 the huge difference is also the result of a gas interconnector Stara Zagora- One of the least known secrets downward renegotiation of Russian Komotini. is that LNG from the United States pipeline exports. LNG is natural gas that is cooled has become highly competitive Even a country like Bulgaria, to -161 C, at which point it becomes a versus Russian pipeline gas. The probably the most “addicted” to liquid and occupies only 1/600th of its unconventional gas revolution in the Russian pipeline gas, bought the first US has boosted the US economy and LNG from the US last May, at prices Continued on Page 11 16 - 31 DECEMBER 2019 | SPECIAL REPORT | UKRAINE GAS TRANSIT: WHAT’S AT STAKE | EURACTIV 11
Continued from Page 10 Moreover, 10 bcm of storage be used during the winter. capacity in the West of Ukraine is “All the preconditions to make original volume, making it convenient unutilised because of bottlenecks this business successful are there”, he for shipping. The process needs created by Gazprom. Unlocking those stressed. liquefaction plants, specially designed interconnectors between Ukraine and An additional reason why Ukraine ships fitted with cryogenic cooling the EU will make those 10 bcm of extra really needs to be prepared for a tanks, regasification terminals. storage available for traders. completely different gas business is Russia says the process is very Ukraine’s strategy is to accumulate the uncertainty about the two Russian expensive and pipeline gas will always gas when the prices are low and sell it to pipelines bringing the Russian gas be cheaper. But Russia has also hugely EU consumers during price increases, into Ukraine. overspent on developing gas in the thus mitigating price spikes. The role Reportedly, these have not been northern Yamal peninsula and cannot of Ukrainian UGSs gets even more properly maintained over the last 30 push its price down. significant in balancing scenarios years and there is a risk that Russian The whole Russian strategy with gradually growing LNG influx to gas will stop flowing in Ukraine for of having long-term contracts for Europe. purely technical reasons. imported pipeline gas is in shambles, Andrew Favorov, head of the as clients seek flexible commercial Integrated Gas Business Unit at terms. As an example, it is impossible Naftogaz, told EURACTIV that Ukraine to imagine that the 10-year Russia- could also serve as gas storage for Ukraine gas transit contract expiring distant clients. He explained that the on 31 December 2019 could be renewed world gas production during the year in terms similar to those of 2009. is uniform, while the consumption is seasonal, peaking in the first and the EUROPE’S LARGEST GAS last quarter. STORAGES “The most profitable market for gas supplies is Asia, mainly Japan, As it is impossible to predict what South Korea and China. Therefore, will happen after 1 January, Ukraine gas producers target those markets for doesn’t keep all its eggs in one basket. supplies. But the Asian countries do One of the assets the country inherited not have gas storages. The world gas from the former Soviet Union are the summer production needs to be stored huge underground gas storages (UGS), somewhere, and Ukraine has a huge the largest in Europe, located mainly potential for the commercialization of close to the border with EU neighbours its storages. We see that this service is (Poland, Slovakia, Hungary, Romania). requested,” he said. These UGS, with a capacity of 31 Favorov also said that European bcm, can store gas purchased from independent traders already store in the Baltic Pipe and Świnoujście LNG Ukraine significant volumes that were terminal in Poland. injected during the summer and will 12 16 - 31 DECEMBER 2019 | SPECIAL REPORT | UKRAINE GAS TRANSIT: WHAT’S AT STAKE | EURACTIV
As Ukraine unbundles its gas system, the architect speaks
By Georgi Gotev | EURACTIV.com
and Gazprom, consent from Gazprom was needed to transfer rights/ obligations under the existing contract to a new independent GTS Ukrainian operator (Ukrtransgaz (UTG). UTG, a subsidiary of Naftogaz, has already reassigned nearly 10,000 employees involved in gas transmission and ensured that all necessary business processes and IT- systems are in place. The dispatching centre, the heart of the transmission operation, is fully transferred to the Transmission System operator (TSO). The Russia-Ukraine gas contract contract expires on 1 January, and this is also the day when UTGis ceding the TSO to Mahistralni Gazoprovody Ukrainy (MGU), a state-owned company, which is independent from Naftogaz group. Along with the handover of the TSO Clare Spottiswoode [Website of Naftogaz] ownership to MGU, the government will transfer the gas transmission system under full operational control nbundling the gas electricity and gas market in the Third of the new TSO, led by CEO Sergiy transmission system of energy package. Makogon. UUkraine will become effective On 17 November, the long awaited The control over the MGU itself is on 1 January 2020. This is a major “Unbundling Law’ came into force transferred to the Ukrainian Ministry milestone following years of internal after being passed by the Parliament of Finance. According to law, no bickering, as well as obstructions from on 31 October. The Energy Community interference from their side is possible the Russian side. EURACTIV spoke commented that “following years of into the operational/investment to chief unbundling architect, Clare inertia and political infighting, the activities of the TSO. Spottiswoode. adoption of the Law removes one of “We just had a long meeting with the main obstacles to compliance in the MGU, the supervisory board, and Ukraine is a party to the Energy the country’s gas sector and for the we were just confirming that making Community Treaty and has an continuation of long-term gas transits sure that everything was fine. They Association Agreement with the EU. from Russia”. were happy that they had all the skills Both require aligning legislation in There were obstructions from and the people they needed to run the energy field with the EU acquis, Moscow – as a party to the existing gas namely with the rules on the internal transit agreement between Naftogaz Continued on Page 13 16 - 31 DECEMBER 2019 | SPECIAL REPORT | UKRAINE GAS TRANSIT: WHAT’S AT STAKE | EURACTIV 13
Continued from Page 12 Asked what the difference between Therefore, you should pay for the value unbundling in the UK and in Ukraine of those assets that you are forcing us the unbundling from 1 January”, said was, she said the task in the UK had never to be able to use. They were built Spottiswoode, speaking on the phone been greater. for you. They are designed purely for from Kyiv on 18 December. She has the “We had to unbundle the pipelines, your system, we can’t use them in any title of chairwoman of the supervisory not just the national pipelines that other way. Therefore, you owe us for board of Naftogaz. we’re doing here, but also the tiny the value that you are depriving us of Spottiswoode paid tribute to the pipes going into each individual and there are also legal reasons why Naftogaz CEO Andriy Kobolyev, who premises, each individual house. So that is money owed to us.” has run the state company since the our task was far bigger than what we’re Asked if the Russians accept this 2014 Ukrainian revolution, when he doing here. And also it has never been narrative, she replied “Of course not”. was chosen as an outsider untainted done before, so we had to work out Asked about the ongoing talks with by the corruption of the regime of from scratch, what model to use and Russia to possibly continue gas transit Viktor Yanukovych. what was important, how to make sure via Ukraine, in which the Stockholm “Andryi and I promised that we that we had the computer systems in arbitration appears to be a bargaining would deliver on bundling and I think place. And that was 1996, a long time chip, she said it didn’t make sense for many people just didn’t believe us. ago. Computers were far less powerful Ukraine “to throw away” the value of They were very sceptical. But […] it’s then. I think that was a far, far more the Stockholm arbitration. all done and it will be delivered”, she difficult process”, she said. Asked what would happen said. She also said that in the UK, on 1 January in the absence of an Spottiswoode came on board the political circumstances had agreement, if Russia continues to Naftogaz in January 2018. She been easier, while in Ukraine, there pump gas in Ukraine, as an expert explains: was “another set of complexities”, recently ventured to imagine, “One of the reasons I was with a change of administration Spottiswoode said that firstly, Russia appointed is because I did the first halfway through, and international would be “stupid” to do that. ever unbundling in the whole implications with Russia and the EU. “If they did that, we would just say, world in the UK. Because we were Regarding relations with Russia, right well, that’s unknown gas, it has introducing competition, and in she mentioned another Ukrainian no owner, it is ours thank you very order to create vibrant competition, request for the Arbitration Institute of much. If they proved it was Russian we had to separate out the monopoly the Stockholm Chamber of Commerce gas, then we will say right, we’ll take parts, which is the network, the pipes. to rule on a $12 billion claim against those assets because you have owe us a And so I had to work out a design for Gazprom. Ukraine already won one lot of money. So we’re restraining your unbundling our pipelines to ensure such legal battle to the tune of $2.5 assets around the world in order to get that we could get competition. So we billion. paid the debt that you owe us from did that in the UK. So it’s somewhat of Asked to explain this claim of huge Stockholm. So, I mean, Russia might a surprise to me when I came back to dimensions, she said: do that, but I don’t know why they this job in Ukraine that the European “Andriy [Kobolyev] described it to would. I mean, you never know.” Commission has adopted a model for the British ambassador really well, he And she added: unbundling which is identical to what said just imagine you’ve got a $1000 “But I don’t know what the TSO I designed all those years ago. So it’s iPhone and you lease to someone for a will do, it’s possible they will just shut very familiar to me, the whole process year, but they give it back to you after down the valves anyways, so that of unbundling and how to do it”, she six months having paid you half the they can’t send gas. Because if there’s said. lease, and then you lose out on money no transit agreement, and there’s no Asked about the Russian because that iPhone isn’t worth the interconnection agreement, then why obstructions, Spottiswoode said that same to you, particularly if they’ve would they not close down the valves?” unbundling was a complicated and locked it and you can’t use it.” She time-consuming task. continued: “To me, 1 January 2020 was actually “So what we are doing here is quite a quick date to deliver everything we’re saying to Gazprom, we have all you need to do to get unbundling done. these pipelines that were designed So to me, [the deadline with the expiry specifically for you. We can’t use them of the Russian gaz contract] has never for any other purpose, you are now been a constraint”, she said. not providing us with any transit. 14 16 - 31 DECEMBER 2019 | SPECIAL REPORT | UKRAINE GAS TRANSIT: WHAT’S AT STAKE | EURACTIV
Russia and Ukraine finalise gas deal just ahead of New Year deadline
By Georgi Gotev | EURACTIV.com with AFP
File photo. Ukraine’s Naftogaz’s CEO Andriy Kobolyev speaks to the press after a Trilateral Gas Talks between the European Union, Russia and Ukraine at the EU Commission headquarters in Brussels, Belgium, 28 October 2019. [Stephanie Lecocq/EPA/EFE]
oscow and Kyiv on Monday them have been shredded since Volodymyr Zelensky announced on (30 December) signed a Moscow annexed Crimea in 2014 and his Facebook page, nearly two weeks Mfive-year agreement on the supported a separatist insurgency in after a provisional deal was agreed. transit of Russian gas to Europe via eastern Ukraine. “A whole complex of documents Ukraine, after months of difficult talks Some 18% of the European Union’s has been signed,” allowing “the transit but just ahead of a looming New Year annual natural gas consumption of gas after 31 December,” Alexei deadline. comes from Russia via Ukraine, Miller, the boss of the Russian gas putting additional pressure on EU giant Gazprom told Russian media. The current gas transit deal officials who helped to broker the deal. It is expected that Gazprom will between the two ex-Soviet countries “Ukraine has signed a five-year expires Tuesday and ties between transit contract,” Ukrainian President Continued on Page 15 16 - 31 DECEMBER 2019 | SPECIAL REPORT | UKRAINE GAS TRANSIT: WHAT’S AT STAKE | EURACTIV 15
Continued from Page 14 Last year Russian gas giant would give Russia too much influence Gazprom supplied Europe with over security and economic issues in transit at least 65 billion cubic meters 200.8 billion cubic metres of natural western Europe. of natural gas via Ukraine next year, gas, with about 40% going through As EURACTIV revealed, the US is then at least 40 billion per year from Ukraine, earning the country around also ready to impose sanctions to any 2021 to 2024, said Zelensky, earning $3 billion a year in transit fees. additional lines to Turkish Stream Kyiv “more than seven billion dollars”. Russian President Vladimir Putin pipeline. Other details unveiled by said earlier this month that Moscow Transit problems for Russian gas Ukraine’s Naftogaz include the wanted to keep some gas flowing began after the fall of the Soviet Union $2.918 billion compensation paid through Ukraine, despite having built when an independent Ukraine won by Gazprom under the Stockholm several pipelines to Europe since the control of the pipeline infrastructure. Arbitration Awards of December current deal was agreed a decade ago. Several supply crises followed, 2017 and February 2018, which was It comes days after Russian energy with Russia using gas as a weapon received by Naftogaz on 27 December giant Gazprom paid $2.9 billion to against Ukraine and cutting supplies 2019, as well as a withdrawal from all Ukraine’s Naftogaz to settle a long- repeatedly in 1992, 1993 and 1994. arbitration proceedings where final running dispute over transit fees, in The current contract between decisions have not been rendered yet. what had been a major stumbling Russia and Ukraine was signed The EU has mediated in the difficult block to agreeing the new deal. following the last gas crisis which Ukraine-Russia talks. Russia’s gas pipelines include ended up disrupting European “We have demonstrated Ukraine’s the Nord Stream 2 project due to be supplies in the winter of 2008-2009. reliablility as a transit partner for the completed by the end of next year, EU. Our team is grateful to the European which seeks to double gas volumes to Commission for its consistent position Germany. and certifying that the Ukrainian GTS The United States has long is reliable and efficiently managed. We opposed the €9.5 billion project and are also grateful to the US for their firm the US Senate voted last week to slap support of energy security in Europe,” sanctions on companies working on it. Naftogaz CEO Andriy Kobolyev said. Washington insists the pipeline For information on EURACTIV Special Reports...
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