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29/09/2016

Gazprom reaffirms plans to bypass Ukraine in 2019

Europe's East

Gazprom reaffirms plans to bypass Ukraine in 2019

Alexander Medvedev [Gazprom]

Russia’s Gazprom has reaffirmed its plans to cut off gas transits through Ukraine to western Europe in 2019 and urged the European Union to speed up a decision on Russian gas delivery routes to ensure it receives supplies after that time.

Moscow wants to bypass Ukraine in its shipments of gas to Europe due to a succession of pricing rows. Tensions between Moscow and Kyiv are also high due to fighting in east Ukraine, where pro-Russian rebels are fighting Kyiv forces.

Gazprom plans switching flows to Turkey by laying pipes beneath the Black Sea, a project known as Turk Stream in Europe and Turkish Stream in Russia.

>> Read: Tsipras: ‘Turkish Stream’ will have another name on Greek territory

“We will not export gas via Ukraine after 2019. The customers will get gas at (newly) agreed delivery points,” Gazprom Deputy CEO Alexander Medvedev told reporters on Tuesday.

He said Gazprom guarantees gas volumes to be delivered to a new hub it hopes to create on the Turkey-Greece border, but said it was for the EU to decide how to take the fuel from there.

Medvedev added that the matter needed to be discussed soon in order to give time to build the necessary infrastructure on the EU side.

In fact, Gazprom has plans for the continuation of the pipeline via the territories of Greece, Macedonia, Serbia and Hungary has been given the provisional name of Tesla.

>Read: Greece, Macedonia, Serbia and Hungary discuss ‘Turkish Stream’

However, Greece, Serbia and other countries are reportedly under US pressure to abandon such plans.

>> Read: US discourages Greece from Turkish Stream

>> Read: Serbia to diversify its energy suppliers

The European Commission said it had not received any specific plans from Russia over Turk Stream. Also, it is unclear how Gazprom would substitute the present contracts with its customers in the EU which specify a point of entry of the gas which is different from the route of the planned pipelines Turk Stream and Tesla.

In December, Russia scrapped its South Stream pipeline project which would have supplied gas to southern Europe without crossing Ukraine, because of objections from the EU on competition grounds and the decision of Bulgaria to freeze the project.

Indeed, the Commission has put pressure on Bulgaria to freeze South Stream, citing breaches to EU law in the intergovernmental agreement for the construction of the pipeline.

>> Read: Barroso warns Bulgaria on South Stream

Turkish Energy Minister Taner Y?ld?z told Reuters on Monday that Gazprom was likely to start the construction of Turk Stream by the end of June.

There is still no inter-governmental agreement between Russia and Turkey to build the pipeline.

Medvedev added that all commercial conditions for a contract with Turkey’s state-owned Botas had been agreed, while the price might be agreed by the end of this month.

He also said Gazprom plans to export between 153 billion and 155 billion cubic metres to the European Union and Turkey this year.

The company sees an average price for gas supplies to the EU and Turkey at between $240 and $245 per 1,000 cubic metres, Medvedev said at a conference.

Separately Gazprom was given a two-month extended deadline of mid-September to respond to European Union antitrust charges of over-charging in eastern and central Europe and blocking competitors from entering the market.

Background

Facing objections from the European Union, in December Russia abandoned its $40 billion South Stream project. It would have extended under the Black Sea to Bulgaria, and carry up to 63 billion cubic metres (bcm) of gas annually to Europe.

Instead, Russian gas exporter Gazprom said in January it planned to build an undersea gas pipeline with the same capacity to an as-yet unbuilt hub on the Turkish-Greek border by the end of 2016.

The EU is sceptical as to the chances of this project and officials in Ankara said that its timeframe was unrealistic.

>> Read: Šef?ovi?: Turkish Stream ‘will not work’

>> Read: Political concerns mar Turkish Stream project