Page 8 - FSUOGM Week 48 2021

FSUOGM COMMENTARY FSUOGM

at the end of this year and will need extending. an extremely closely guarded secret. Hungar-
Earlier Russian media reported that Vucic was ian authorities insisted that the new deal which
looking to obtain 3bn cubic metres (bcm) per will last up to 15 years will result in a lower price
year of annual supply from Russia. than the one calculated in the old agreement that
While contractual talks are not complete, expired that month. Analysts speculate what that
with further discussions due to take place in means in practise is a greater share of oil indexa-
Moscow, both countries’ leaders indicated that tion was used in the pricing formula.
Serbia could count on getting a decent price for Like the Serbian government, the governing
Russian gas next year. The assurance of a low Fidesz-KDNP Party Alliance in Budapest is fac-
price for six months is important, as Serbia will ing parliamentary elections this spring, and is
hold general elections in April and energy bills keen to ensure a spike in energy bills does not
are likely to take centre-stage in the run-up to undermine its popularity.
voting.
Serbia is in a better position than other coun- Turkey
tries to secure favourable terms from Gazprom The biggest change to the gas business in the last
owing to its support for the extension of the Rus- year was the advent of TurkStream that went on
sian company’s TurkStream pipeline into south- line in January and has not only opened a new
east Europe - a project that Russia has viewed large capacity route to from Russia to southern
as critical for cutting gas transit via Ukraine. It Europe with its 31bcm nameplate capacity, but
has also allowed Russia to maintain a dominant has already seen exports from Russia to Turkey
position in its oil and gas production, gas trans- up by about 100% and reducing Ukraine’s transit
mission, oil refining and petrochemicals sec- fees by around $1bn thanks to re-routing.
tors. The country has notably resisted EU calls The various contracts between Gazprom
to unbundle its gas transmission infrastructure, and Turkish gas imports remain oil-indexed,
even though it is still aspiring to join the bloc by although there had been expectations in recent
the late 2020s. years that some of these buyers would push for
hub-based pricing. In light of current market
Hungary conditions, however, it is likely they will stick
Hungary inked a new and very controversial deal with oil indexation for the foreseeable future.
with Gazprom in September that diverted gas Russian gas supplies to Turkey slumped in
that used to flow through Ukraine and rerouted 2019 and early 2020, as a drop in global LNG
it via the newly launched TurkStream pipeline, prices meant Gazprom’s gas was uncompetitive
cutting Ukraine out of the loop. versus super-cooled shipments from overseas.
The deal, involving EU member Hungary, But they have rebounded steeply this year -
caused a major diplomatic flare up with Kyiv almost doubling year on year between January
calling in the Hungarian ambassador to Ukraine 1 and November 15 - as prices at gas hubs have
to complain. Ukraine is afraid of losing a sub- soared.
stantial amount of its circa $2bn a year in transit A number of contracts between Gazprom
fees if the new Nord Stream 2 gas pipeline comes and Turkish buyers are due to run out soon, but
online, but the Hungarian gas deal is already a it is likely that pricing terms will more or less be
step along that road. Kyiv protested that the the same as before, although the Turkish side is
Hungarian deal was “use of gas as a weapon” likely to push for reduced take-or-pay require-
and demanded that the EU and US impose ments. Complicating these talks is the fact that
fresh sanctions on Russia as a result. Nothing some private Turkish buyers have amassed a debt
happened. of billions of dollars to Gazprom for previously
Hungary obviously got a better deal with failing to meet take-or-pay obligations.
lower prices from its new deal, but the details are While current market conditions give

P8 www. NEWSBASE .com Week 48 01•December•2021