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bne October 2021 Special focus I 45
higher than in the pre-crisis first half of 2019,” says Yermarkov.
Pipeline switches
Russia remains Europe’s swing sup- plier, in the strongest position to react to changes in demand. Previously the swing supplies would be sent via Ukraine, but Russia’s pipeline network is changing.
New pipelines have come online in the last two years – Nord Stream 1 and Turk- Stream – and it is not a coincidence that
has already been the central prong that goes via Ukraine.
In 2018 Gazprom transited 86.8
bcm via Ukraine using about 65% of Ukraine’s available transit capacity to Europe that year. In 2019 Russian gas transit through Ukraine rose by 3%, to 89.2 bcm. But under the new deal with Ukraine the annual booked capacity for 2020 was 65 bcm in 2020, falling to 40 bcm a year until the deal expires in 2024. In 2020 the actual transit via
an annual equivalent of 39.2 bcm. Aside from January 2021 (when Gazprom booked around 41.6 mcm per day of extra capacity), Gazprom booked 15 mcm per day of firm monthly capacity via Ukraine – the exact amount offered by GTSOU, the Ukrainian gas pipeline operator. This was also the maximum amount covered by the Russia-Ukraine interconnection agreement on the Russia-Ukraine border,” says Yermakov.
Gazprom remains reluctant to book more export capacity – GTSOU is also offering “interruptible” capacity where space in the pipeline is not guaranteed – partly as transit via Ukraine is now by far the most expensive option and GTSOU has not been offering the usual 60% discount for interruptible capacity.
Ageing fields
Russia has a lot of gas, but some of its fields are getting very old. In a speech in September Gazprom CEO Alexei Miller said that Gazprom has “reserves for 100 years” but the geography from where it extracts its gas is changing, says Yermakov.
“For almost forty years, Russia’s gas output has been supported by the Soviet legacy of super-giant Cenomanian gas fields in the Nadym-Pur-Taz (NPT) region in Western Siberia, but these fields are now in irreversible decline,” says Yermakov.
“Gazprom has been trying to manage the output decline by developing wet gas from deeper layers of the NPT super-
“With the two new forks to Russia’s gas pipeline delivery trident to Europe – Nord Stream 2 in the north and Turk-Stream in the south – the biggest loser has already been the central prong that goes via Ukraine.”
these two countries also took the biggest increases in Russian gas flows west this year. Germany would have taken even more – enough to avoid the current supply crisis – had Nord Stream 2 been complet- ed as scheduled at the end of last year.
Nord Stream 1 utilisation amounted
to 58.7 bcm, 58.5bcm, and 59.3 bcm
in 2018, 2019, and 2020 respectively (exceeding the nameplate capacity of the pipeline by 6-8%). This was helped by the start of the EUGAL pipeline that allowed Gazprom to overcome the regu- latory restrictions imposed on the full use of the OPAL pipeline.
Gazprom launched its new 31.5 bcm TurkStream pipeline in January 2020. Russian gas exports via TurkStream amounted to 13.5 bcm in 2020 (43% utilisation of 31.5 bcm combined capac- ity of the two strings). It is expected to ramp up utilisation with the redirection of deliveries to Serbia and Hungary away from the Ukrainian route when the pipeline connections to these countries become fully operational.
With the two new forks to Russia’s gas pipeline delivery trident to Europe – Nord Stream 2 in the north and Turk- Stream in the south – the biggest loser
Ukraine was 55.8 bcm, but Gazprom had to pay for the full 65 bcm anyway under the terms of the new deal.
The deal specifies equal daily bookings of 178.1mn cubic metres per day in 2020 and 109.6 mcm per day in 2021-2024. The bonus for Ukraine is Gazprom agreed to take-or-pay terms: Russia has to pay for the capacity even if it doesn't use it out to the end of 2024.
“So far in 2021 the daily average transit flows via Ukraine (excluding deliveries to Moldova) have been 107.3 mcm per day from 1 January to 31 August, equating to
Gazprom daily gas production by main fields in 1H 2021/2020 (million m3 per day)
Source: OIES research, data from Gazprom
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