Page 43 - bne magazine November 2021_20211104 uzbekistan risding

bne November 2021 Special focus I 43
this winter is a cold one. Pundits have claimed that Gazprom is deliberately restricting gas deliveries to Europe, despite the record prices and demand, as a way of exerting pressure on the EU to accelerate the process of granting an operating permit for Nord Stream 2, which was completed in September but still doesn't have permission to operate.
The EU governing authority said
last month that the permits may be issued as late as January. Amongst the issues on the table are Europe’s third energy package rules, which may force Gazprom to share half the pipeline’s capacity with other “independent” operators. Russian oil major Rosneft has already said it is willing to be that other operator. Currently under Russian law Gazprom has a monopoly over gas exports from Russia.
The row comes in the context of
a growing crisis as EU countries
prepare for the looming heating season. Although there is already enough gas
in storage to get through the winter, there is little marginal extra gas,
which is making governments nervous. As bne IntelliNews recently featured, analysts say that without Nord Stream 2 Gazprom’s ability to increase production and exports is already running up against its maximum; Nord Stream 2 connects Russian gas in the Yamal fields to Europe, but that gas cannot be sent via Ukraine because the interconnecting pipelines are already at full capacity.
Gazprom had planned to send 5.6 bcm of gas to Europe via its newly built Nord Stream 2, which was supposed to come online over a year ago.
Gas prices took another step up on October 1 to $1,200 per thousand
cubic metres after supplies in the Yamal-Europe pipeline, which traverses Poland, fell by 77% from the day before. Gazprom said the fall was due to one large customer taking the gas. Gas prices are up 400% year to date (ytd).
The Kremlin reiterated the same day that Gazprom, whose gas exports outside the former Soviet Union rose 15.3% y/y in the first nine months
of 2021, was meeting all its contract obligations in full.
"Gazprom is supplying gas in accordance with customers' requests under contract obligations," the company said in emailed comments to Reuters.
In her last month in office German Chancellor Angela Merkel has trying to cut an almost impossible energy deal
that will allow Germany to receive gas from Russia’s new Nord Stream 2 but keep some gas flowing through Ukraine’s Druzhba gas pipelines. During a meeting in Moscow last month Russian President Vladimir Putin told Merkel that Russia was open to sending gas via Ukraine, provided the EU was prepared to sign off on long-term supply contracts, something that Europe is reluctant to do, but Hungary was less hesitant over.
Ukrainian protests
Under the terms of a long-term supply deal with Budapest that kicked in on October 1, Gazprom halted gas supplies to Hungary via Ukraine and started
to send them via Serbia and Austria instead using the new TurkStream pipeline. Previously the Ukrainian transit route would have typically transported 24.6mn cubic metres of natural gas per day.
“Supplies via this route have become possible thanks to the construction of a new trunk gas pipeline of the company FGSZ Ltd on the territory of Hungary
and completion of an expansion of the national gas transportation systems in Bulgaria and Serbia, where the operators Bulgartransgaz EAD and GASTRANS d.o.o. Novi Sad have commissioned compressor stations,” Gazprom said in a statement announcing the change of route.
The new deal will further deprive Ukraine of transit revenues and also means it can no longer import reverse flow gas via Hungary, which it has been doing since 2015 when Ukraine stopped importing gas for its own use from Russia.
The Hungarian deal makes use of the new TurkStream pipeline to the south that went live in January. Ukraine has already lost $1bn from the circa $3bn it used to make in transit fees as more gas to Europe that used to transit via Ukraine is now being sent through the new southern spur to Gazprom’s trident of pipeline networks serving customers in Europe.
On the same day the head of Ukraine's Naftogaz, Yuriy Vitrenko, called on Washington and Germany to honour what he said were pledges to impose sanctions on Gazprom if gas was used as a weapon against Ukraine. Vitrenko has also been warning that if Nord Stream
2 is put into operation there is a chance that Russia will invade Ukraine.
The Kremlin is doing this on purpose. It's not even sabre rattling; it's the obvious use of gas as a weapon," Vitrenko said on Facebook.
Russia's Gazprom switched its delivery of gas to Hungary from using the Ukrainian pipes to TurkStream instead. Kyiv protested that this was using gas as a "weapon" and is demanding the US and EU impose sanctions on Gazprom.
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