Page 6 - FSUOGM Week 10 2022

FSUOGM COMMENTARY FSUOGM

Ukraine’s gas infrastructure are

safe for now, but not for long

There are fears that the country's pipelines and storage facilities could get
caught up in the fighting

UKRAINE THE price of gas on the Dutch TTF spot mar- approximately 15 bcm deficit from the roughly
ket soared to a new all-time high of over $3,000 100 bcm that Russia sends to northern Europe
per thousand cubic metres on March 7 as energy each year, so knocking out Ukraine’s storage
traders fear the natural gas transit from Russia to capacity would already cause a bigger gas crisis
Europe and Ukraine’s extensive storage capacity than last year even before supply and demand
will be caught up in the ongoing war there. concerns come into play.
For comparison, at the peak of the gas crisis Taking out the pipelines and removing an
last year the highest level prices reached was additional 40 bcm from Europe supply plunged
just over $2,000 and normal long-term piped Europe into an even bigger gas crisis that would
gas prices are closer to $250 per thousand cubic almost certainly mean freezing homes and roll-
metres. ing blackouts through all of next winter.
One of the factors driving up prices is that Ukraine’s own gas production is also in dan-
both the Ukrainian gas pipelines and the coun- ger. Ukraine has a gas deficit and has to import
try's extensive gas storage could get caught up in around 15 bcm of gas a year – now all imported
the war and be damaged or captured. from Ukraine’s partners to the west as it banned
The map shows there are about five main imports from Russia about three years ago – but
strands that run through Ukraine to the west and it also has two large gas basins in the east and
so far they have been largely unaffected by the west and produces about 20 bcm of gas a year,
fighting and remain in Kyiv-controlled territory. reducing the need to import.
Ukraine also has the largest gas storage capac- The Dniper-Donets basin contains 1.34 tril-
ity in Europe. When the Soviets got into the gas lion cubic metres of gas and is in the most dan-
business, they built almost all of the main storage ger. It runs along the eastern bank of the Dnieper
tanks in Ukraine, which are filled over the course river. For the moment the gas field is just south
of the summer so that gas can be piped to cus- and east of the Russian occupied territory along
tomers in western Europe over the winter. the eastern border.
Ukraine’s 33.57bn cubic metres of gas stor- The Lublin basin contains 1.4 to 4.1 tcm of
age is just under 80% of all gas storage capacity gas and is in Kyiv-controlled territory in the west
outside the EU. Ukraine’s storage is also about of the country running south from Lviv to the
21% of all of Europe’s (EU and non-EU) storage Moldovan border far from the fighting.
capacity. If the war disrupts production in the Dniper-
The EU gas storage capacity is a significant Donets basin that would halve Ukraine’s own
161 bcm with Germany having the largest indi- production of gas and also plunge the country
vidual storage capacity (26 bcm), followed by into its own gas crisis as well as sending the cost
Italy (20 bcm) and the Netherlands (15 bcm). of importing gas soaring.
However, without the Ukrainian super-tanks Ukrainian storage tanks lie beside the two
Europe cannot store enough gas for the winter gas basins in the east and west, with their total
without switching to alternatives such as LNG storage capacity roughly divided between the
and renewables, both of which are still limited in two clusters.
scope to expand their European supplies. Those in the west scattered around Lviv are
As of March 6 the tanks in the EU are only in government-controlled areas and in relative
27.3% full – their lowest level in four years – but safety for now, but the eastern clusters are mostly
that is still much better than the 12% full they south of Kharkiv, which is in the epicentre of the
were expected to be at the end of the heating current fiercest fighting. These storage tanks
season during the depths of winter last year after are sufficiently far away from the city centre for
starting the heating season with the least gas them not be in any immediate danger of being
in storage for the last two decades. That means damaged and well inside government-controlled
Europe has got through this winter without run- territory, but several of the tanks are inside the
ning out of gas as some had feared, as the heating borders of the great Donbas region and one of
season is due to finish at the end of March. the scenarios is the Kremlin will capture the
Last year’s gas crisis was caused by an entire region and make it into a country. In this

P6 www. NEWSBASE .com Week 10 10•March•2022