Workaround. Can Gazprom do without Ukrainian pipe
© 2018 AFP / Eric Piermont
MOSCOW, March 6 — RIA Novosti, Igor Naumov. The Gazprom’s decision to terminate contracts with “Naftogaz” will create a new reality in the energy market of the EU. The main directions of export of Russian fuel will be gas pipelines to bypass Ukraine. To break the long-term commitment to the European partners can not.
“Bomb” from the President
Monday, March 5, in the address “Naftogaz” was officially notified about the beginning of procedures for termination of contracts for the supply and transit of gas. With the corresponding statement was made by the Chairman of the Board “Gazprom” Alexey Miller. The procedure will hold the Stockholm arbitration.
This is the response to the verdict of the Swedish court, according to which the Russian company must pay of 2.56 billion Ukrainian. Miller accused the judges of double standards, stressing that in this “situation, the continued operation of contracts of “Gazprom” economically inexpedient and unprofitable”.
Extremely nervously reacted to the events in Kyiv. In particular, the first Vice-speaker of the Verkhovna Rada Iryna Gerashchenko called the action “Gazprom” “gas blackmail by Russia,” and threatened to bring the issue to the consideration of the inter-parliamentary Council Ukraine-NATO, which started its work in Odessa.
In Brussels the words of Miller was also of concern. Last Saturday Vice-President of the European Commission maroš Šefčovič discussed the situation by telephone with the Minister of energy of Russia Alexander Novak. The result of the conversation was the official report of the European Commission that the procedure for termination of the contracts will take time and the supply of Russian gas to Europe through the territory of Ukraine is continuing.
To call the date of commencement of consideration of a new case in the Stockholm arbitration lawyers still find it difficult, however the actions of the Russian companies they consider legitimate. The lawyer of the company “Khrenov and partners” Alexander Kostin noted that the verdict significantly affect the interests of Gazprom and the agreement of the parties.
“Contract termination is an inevitable consequence of this decision. But unlike the state court in arbitration the terms of the case are determined by the composition of arbitrators for each individual case independently,” — said the lawyer.
© Photo : “Turkish stream”
The operation of the vessel-pipelayer “Pioneering Spirit”
“Gazprom” will continue the transit of gas through Ukraine. Recall that gas supplies to the EU are carried out in three main pipelines, Kiev inherited a legacy from the Soviet Union: “Union”, “Brotherhood” and TRANS-Balkan.
Their total length on the Ukrainian territory is almost 3.7 thousand kilometers. In 2017, according to “Ukrtransgaz” to these tubes pumped 93,5 billion cubic meters of Russian gas. This is approximately 14% higher than a year earlier.
Kiev had hoped that in the next two years, i.e. until the expiry of contracts between “Naftogaz” and “Gazprom”, the annual transit volumes will increase to 110 billion cubic meters. Taking into account the tariff increase was expected to substantially replenish the Ukrainian budget: from two to five billion dollars a year.
However, these plans are buried in the verdict of the Swedish court, though rendered in favor of “Naftogaz”. However, the controversial decision to support the expense of “Gazprom” the Ukrainian economy is in fact only accelerated the process of transferring the main export routes of Russian gas to Europe.
In 2016, “Gazprom” announced the program of optimization of costs, which among other things provides for, after the commissioning of the “Nord stream 2” the elimination of nearly four thousand kilometres of overland pipelines. There is no policy, but a simple economic calculation — the cost of shipping gas from Russia to the EU through the Baltic sea is 1.6 times lower than in Ukraine.
To completely disable the Ukrainian pipeline was not planned. Analyst of Sberbank CIB Valery Nesterov confirms that this route could well be in demand after 2020. In particular, for the supply of gas to Slovakia, Hungary, the Czech Republic and Poland.
Another thing is that Kiev probably would have tried to compensate for the drop in income from reduced exports by raising tariffs in the four or five times. And the Russian exporter will never agree to such conditions, said the interlocutor of RIA Novosti. This means that in a couple years to parties in any case would have had to announce the termination of cooperation.
© Photo : Nord Stream 2 / Axel Schmidt
Pipes for gas pipeline “Nord stream ‑ 2” concrete weight coating plant in Kotka, Finland
A sense of duty
In the crossing events is one important caveat — the obligations of “Gazprom” to European counterparties under long-term contracts. Some of the agreements will be in effect even after 2035.
© RIA Novosti / Alexei vitvitskiy
Go to photo Bank
The European Commission has confirmed the integrity of gas supplies from Russia to the EU
To refuse execution of a Russian company are not entitled to. Previously, experts expressed the opinion that these contracts could be revised after the transit agreement with Kiev. And now the negotiation process will have to accelerate.
“Will need to be significantly reformatted gas flows to Europe and new risks for all parties involved,” says senior lecturer in strategic management of energy, Russian state University of oil and gas named after Gubkin Sergey Eremin.
He did not rule out that one of the solutions to the problem may be the transfer points of the gas transmission from the West to the Eastern border of Ukraine. Then the European partners “Gazprom” will take responsibility for further transportation of the fuel.
By the way, energy companies EU without enthusiasm is related to a similar perspective, citing the fact that the risks of unauthorized selection of gas to Ukraine and other costs of conflict taken into account in high contract prices for natural gas.
Nesterov, in turn, does not believe in the final the Russian-Ukrainian “divorce”. But if the transit contracts are still terminated, the “Gazprom” will fulfill obligations under long-term contracts and without Ukraine.
The expert reminded that the power of “Blue stream” through which gas goes from Russia to Turkey is 15-16 billion cubic meters, gas pipeline through Belarus to 30 billion cubic meters, “the Northern stream” — 55 billion cubic meters. That is, now, without regard to the “Nord stream 2”, this is enough to ensure the supply of fuel to the EU under long-term contracts.
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