Page 7 - FSUOGM Week 34 2021

FSUOGM COMMENTARY FSUOGM

"We will export gas from Russia to Europe bcm in 2040. But the good news for suppliers like
after 2024, and it's important here that Ukraine Gazprom is that the continent's import needs are
should stay a transit country, and it's important nevertheless set to rise from 346 bcm in 2019 to
that this agreement should stay, and then step 360 bcm in 2025 and inch up to 362 bcm in 2030.
by step – it's very important to Russia – Ukraine They will then contract to 351 bcm by 2040.
should also develop in the direction of climate Merkel is not in a position to promise a guar-
neutrality. Germany should achieve that by anteed offtake of Russian gas, nor can she sign
2045. That is why gas consumption will decrease, that kind of contract, leaving the negotiations in
and then gas will not go on Nord Stream or limbo.
via Ukraine's gas transport system, and then Zelenskiy was clearly frustrated with his
Ukraine should be ready for what can be done meeting with Merkel. Germany’s compromise
then," Merkel said. is to fund heavy Ukrainian investment into
Europe will no longer need Russian gas in 25 renewables to wean it off the gas business, which
years' time, Merkel told Zelenskiy. "Europe will is a dying enterprise anyway. A sum of $2bn has
need to achieve climatic neutrality step by step been mentioned and Ukraine has already seen
by 2050," Merkel said, as quoted by Russian news some $5bn invested into renewables in recent
agency Tass. "It means that in 25 year[s] no gas, years as the sector has blossomed on the back
or very small volumes of gas, will be supplied to of very generous green tariffs. But Kyiv is more
Europe from Russia," she added. concerned about the cash it will lose now from
And that is the crux of the problem: the gas transiting than the money it will make later
EU demand for gas is expected to start falling from renewables.
as more and more countries make the transi- “Renewables is the energy of the future, but
tion away from fossil fuels as their new wind gas is the business of today,” said an increasingly
and solar power comes online over the next exasperated Zelenskiy. “We need guarantees
decade. now.”
For the transit via both Nord Stream 1 & 2 as It doesn't seem that Merkel is going to solve
well as sufficient volumes via Druzhba to work, this problem with only weeks left of her last term
the EU will have to commit to taking some 150 in office. She appeared to snub Ukraine by not
bcm of gas via the northern routes, which is staying on in Kyiv an extra day to attend the
probably more than demand will sustain. The inaugural Crimea Platform, a clever PR exercise
Gas Transmission System Operator of Ukraine to put Crimea’s annexation issue back at the top
(GTSOU) CEO Sergiy Makogon told bne of the international agenda that was attended by
IntelliNews in an exclusive interview that if Rus- 44 countries at minister level or above. But the
sia sends less than around 30 bcm of gas a year negotiations continue as Merkel chose to send
via its pipeline Ukraine would decommission a not German Foreign Minister Heiko Maas, who
large part of its network, as it would cease to be is busy dealing with the fallout of the collapse of
economic viable. the Nato-backed government in Afghanistan
During Putin’s meeting with Merkel on anyway, but Peter Altmaier, the head the Federal
August 19 the Russian leader said that he Ministry for Economic Affairs and Energy, who
remained open to sending gas via Ukraine in met with his Ukrainian and US counterparts on
addition to Nord Stream, but Russia also wants the sidelines of the celebrations.
guarantees on the volumes the EU will buy. The Merkel appears to be pushing ahead with her
difficulty is the existing Ukrainian transit deal is plan B to invest into Ukraine’s renewable sector
a take-or-pay affair; in 2020 due to the high levels in lieu of any progress on a new post-2024 transit
of gas storage both sides built up in expectation deal. After the Crimea Platform summit began
of a failure to sign a new transit deal Gazprom Ukrainian state energy company Naftogaz and
sent less than the agreed amounts of gas and paid German energy trading company RWE Sup-
the transit fees anyway. If Russia is to sign a new ply & Trading announced they signed a mem-
deal for post-2024 it doesn't want to be put in orandum of understanding (MoU) to develop
the same position again where it has to pay for hydrogen production in Ukraine – one of the
transit it doesn't use because of falling European alternatives to the gas business that Ukraine is
demand. well positioned to build up.
"We need to get an answer from our Euro- "But it's not a problem that can replace tran-
pean partners on how much they are ready to sit via the Ukrainian gas transport system from
buy," Putin said, throwing the main problem 2024. However, due to the renewable sources of
into stark relief. Putin added that Russia needs energy, which can be expanded in Ukraine, it is
to understand what the scale of demand will be possible to help here to produce green hydro-
before it can commit to a new transit deal and gen by means of hydrolysis, by means of green
this was all simply a question of business. "We energy from renewable sources of energy and
cannot sign a transit contract [with Ukraine] if use it," the chancellor said in Moscow.
we don't have supply contracts with our consum- Altmaier said very little following his meet-
ers in Europe,” Putin added. ing with the other energy ministers in Kyiv, but
The International Energy Agency (IEA) esti- did reveal that Berlin wants to support Ukraine’s
mated in October last year that European gas transition to renewable energy. Altmaier already
demand would decline from 606 bcm in 2019 signed off on establishing an Energy Partnership
to 598 bcm in 2025, 570 bcm in 2030 and 563 with Ukraine in August last year. ™

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