Page 4 - FSUOGM Week 38 2019

FSUOGM COMMENTARY FSUOGM
Ukraine, Russia fail to make
breakthrough in gas talks
Both sides need a deal, but there are a number of obstacles that could derail talks
UKRAINE
WHAT:
EU, Russian and Ukrainian officials met again to discuss a new transit deal, seemingly resulting in little progress.
WHY:
Gazprom and Naftogaz both have substantially different visions for a new agreement.
WHAT NEXT:
All sides want a deal, making it likely, but obstacles remain.
ENERGY officials from Russia and Ukraine met again for EU-brokered talks on September 19 to discuss new gas transit terms once their existing agreement expires in January.
Negotiations were productive but inconclu- sive, Ukraine’s state gas company Naftogaz later said. This sentiment was echoed by the Russian side, as well as outgoing EU Energy Commis- sioner Maros Sefcovic, also present at the mere 40-minute-long meeting. While those involved in the negotiations were keen to convey a posi- tive atmosphere to the proceedings, real progress is urgently needed. If Kyiv and Moscow fail to cut a deal, around 45% of Russian gas supplies to Europe could be put into jeopardy in just over three months’ time.
At the heart of it, Russia and Ukraine want starkly different things from the new contract.
Russia has spent the last few years develop- ing alternative routes to the European gas mar- ket, so that it can divert as much gas as possible from Ukraine. As such, Moscow is seeking a
shorter-term agreement – ideally one lasting only until its 55bn cubic metre per year Nord Stream 2 is running at full capacity. Russia’s Gaz- prom will still need to use Ukraine as a transit route after this point, but is hoping then to agree a new, longer-term deal that reduces transit vol- umes substantially from the 87 bcm level they reached last year.
Nord Stream 2 is officially scheduled to start pumping gas to northern Germany by the end of this year, but Denmark is yet to issue the permits allowing construction through its waters. So far pipelaying is on schedule, with 81% of Nord Stream 2 completed as of September 17, accord- ing to Gazprom. However, work on its Danish section will need to begin next month at the very latest to keep the launch schedule, industry sources told FSU OGM.
Gazprom suffered a blow this month, when Germany enforced an EU court ruling restrict- ing its access to Opal, a pipeline handling gas from the Nord Stream 1 line. The effect on
P4
w w w . N E W S B A S E . c o m Week 38 25•September•2019