Page 19 - FSUOGM Annual Review 2021

FSUOGM AUGUST FSUOGM

The gas pipeline system
of Ukraine. Source:
Gazprom.

customers with the option of hub-based pricing, It has also been clear for some time that the
limiting its ability to charge exorbitant prices. US efforts alone were not enough to bring the
Furthermore, and regardless of Russia’s project to a halt. Washington’s sanctions suc-
intentions, the country cannot expand its mar- ceeded in forcing Swiss contractor Allseas to
ket share on the continent simply by building abandon work on the pipeline in December
another pipeline. If it is serious about expanding 2019, but Russia was able to bring in its own
its share, it will have to entice buyers with com- pipelaying vessels to finish the job.
petitive pricing. The US therefore decided it was better to try
“Russia’s intentions in building the double and save face by permitting the project to go
pipeline have always been clear: they want to ahead, rather than continue its opposition and
dominate European gas supply,” E&C CEO Ben- display impotence.
edict De Meulemeester explains. “That was their The next question is where all this leaves
plan when they built Nord Stream 1 but that plan Ukraine, which has condemned the German-US
failed. You can’t push other suppliers out of the deal. Berlin and Washington committed to using
market by simply building a bigger pipeline than “all available leverage to facilitate an extension
the others have.” of up to ten years to Ukraine’s gas transit agree-
“Let them build that last stretch of Nord ment with Russia” when it expires in 2024. This
Stream 2,” he says. “Adding 55bn cubic metres would give Kyiv sufficient time to prepare for the
of extra import capacity increases massively the subsequent loss of billions of dollars of transit
chances of oversupply and low natural gas prices revenues.
for European customers.” In the worst-case scenario, if these efforts
Gazprom will be able to lower its prices as fail, the EU will have to help Ukraine recoup
Nord Stream 2 will save the company some the lost revenues as well as the 10bn cubic
$1.3bn in transportation expenses each year, metres (bcm) of gas that it currently gets from
which is equivalent to 3-4% of its EBITDA, ana- Russia. The agreement notably provides for
lysts at VTB Capital estimate. the creation of a Green Fund for Ukraine to
support its energy transition with investments
Political pluses and technical assistance, and this could serve
Politically, the agreement between Germany and as the means for compensating Ukraine. At
the US is also good in terms of Western unity. the same time, the end of Russian gas transit
While Nord Stream 2 will increase Germany’s will sever the largest remaining economic tie
economic relationship with Russia, letting the between Russia and Ukraine, which would
project go ahead also removes a major point of help the country re-pivot its economy towards
contention between Berlin and Washington. the EU. ™

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