Gazprom pipelines and export capacity

Газопроводы Газпрома и экспортные мощности

Gas pipelines of West Siberia

Газопроводы Западной Сибири

Export flows of Gazprom

Экспортные потоки

Spot, Gazprom, Brent

Цены на нефть и газ

End-use price of gas

Russia and USA

Daily gas production

Суточная добыча


Excessive Pipeline Projects of Gazprom - 1


Export pipelines Nord Stream and South Stream

Every winter during the new round of gas conflict with Ukraine, some experts note that for secure supplies of Russian gas, the EU needs the Nord Stream and South Stream projects to be completed as soon as possible. A simple math can prove that this statement is incorrect.

The following table shows annual and daily exports of Russian gas to Europe and Turkey in 2020, assuming the Nord Stream and South stream projects are completed. The table presents two scenarios: UKR - Russia's conflict with Ukraine, and BEL/POL - conflict with Belarus or Poland. The scenarios assume minimization of the transit flow through the conflicting country.

Russian Gas Exports to Europe and Turkey in 2020: Annual and Daily Flows

 Export routes

UKR

BEL/POL

UKR

BEL/POL

 Gas flows, billion cub. m/year:

 (1)

 (1)

 (2)

 (2)

 Ukraine
83

118

53

88

 Belarus
35

-

35

-

 Finland

6

6

6

6

 Blue Stream

16

16

16

16

 Nord Stream

55

55

55

55

 South Stream

30

30

30

30

 Russian exports total:

225

225

195

195

 Gas flows, million cub. m/day (January):

 

 

 

 

 Ukraine
300

428

200

328

 Belarus
128

-

128

-

 Finland

18

18

18

18

 Blue Stream

53

53

53

53

 Nord Stream

176

176

176

176

 South Stream

105

105

105

105

 Russian exports total:

780

780

680

680

 Ukrainian daily consumption (3)

310

310

310

310

 Transit to Europe via Ukraine

300

428

200

328

 Ukrainian gas production

-59

-59

-59

-59

 Ukrainian storage withdrawal

-220

-158

-220

-58

 Balance:

331

521

231

521

 Supplies from Russia (4)

310

521

207

521

 Ukrainian siphoning

21

-

24

-

UKR = conflict with Ukraine; BEL/POL = conflict with Belarus or Poland.

(1) Maximum export volume assumed by Gazprom's program of Russia's gas sector development to 2030.

(2) Realistic export volume under the new energy policy of the EU.

(3) Average daily consumption in January in the last ten years.

(4) In UKR case, including fuel gas of compressor stations needed for transit services.

Key Conclusions

  1. In case of completion of the export projects of Gazprom, Ukraine will remain the most important gas transit partner of Russia. If all bypassing pipelines are fully loaded in case of another Russian-Ukrainian gas dispute in the future, Gazprom would still need to ship about 300 million cubic meters (mmcm) of gas daily to Europe via Ukraine. This is equal to the daily transit flow of early January 2009. Ukraine would siphon over 20 mmcm/day of transit gas in the first week of the conflict. Under the realistic scenario, the Ukrainian transit volume drops to 200 mmcm/day, but the siphoning increases slightly.

  2. To provide secure supplies of gas to Europe, Gazprom would still need to use the underground gas storage facilities (UGSF) of Ukraine. Gazprom would have to have the Ukrainian UGSFs fully loaded - in case of a new conflict with Belarus or Poland, Gazprom would need to withdraw about 160 mmcm of gas daily.

    1. Currently Ukraine has no incentives for buying and storing gas during summer moths. The price of $418-450/mcm offered by Gazprom is much higher than the average price of $385/mcm of European exports of Gazprom in the 1st quarter of 2009 (our estimation).  To create an incentive for Naftogaz, Gazprom should offer the Ukrainian company a substantial discount and an option to pay for gas after it is sold to consumers.

    2. Naftogaz may consider buying gas from Gazprom in accordance with the seasonal demand of Ukrainian consumers - more in winter and less in summer. Then, to keep the European exports at the current level of 150-160 bcm/year without using the Ukrainian UGSFs, Gazprom would need to build two new gas pipelines from West Siberia to the EU border (combined length of 9,000 km) and to commission new gas fields producing 200 mmcm/day (twice the capacity of the Yuzhno-Russkoe field). This construction would require over $60 billion of investment costs. Operating expenses of Gazprom would increase by $5-6 billion a year. Under the current crisis, this policy would lead to an inevitable bankruptcy of the Russian gas monopoly.

  3. The Nord Stream pipeline would allow Gazprom to turn off gas supplies to Belarus and Poland without affecting exports to other countries. Therefore, the worries of the Polish authorities about the negative effect of the Nord Stream project on the security of gas supply to Poland are well-grounded. There are no doubts that having a bypass pipeline in case of a political dispute, Russia would turn off gas flow to Poland.

    1. In case of conflict with Bulgaria, Gazprom would be able to cut the gas flow via the South Stream pipeline without reducing exports to other countries.

    2. In case of Russia's dispute with Germany, Gazprom would be able to turn off the Nord Stream pipeline without limiting supplies to other European countries.

    3. The Nord Stream and South Stream pipelines are designed as bypass pipelines without increasing Russian exports or improving the security of gas supply to Europe. On the contrary, these projects are designed to reduce the security of supply to Belarus and the EU member states of Germany, Poland, Hungary, Romania, Bulgaria and Greece. Russia will be able to turn off the gas flow to any of these countries without decreasing other exports.

    4. The export projects of Gazprom can not change the energy security of Ukraine, Slovakia, Czech Republic and Austria.

  4. Under the new energy policy of the EU, Gazprom does not need new export pipelines.

    1. The existing pipelines can supply to Europe and Turkey about 200 bcm of Russian gas a year. The EU plans to reduce its original gas import targets, so Russian gas exports to Europe are likely to be lower than the volumes planned by Gazprom.

    2. Shipment of gas via the South Stream pipeline costs much more than the transit through Ukraine. Transportation of gas via the Nord Stream route is more expensive than the transit through Belarus and Poland (see comment of November 25, 2008). On top of the unnecessary investment costs, the construction of new export pipelines leads to considerable growth of operating expenses of Gazprom.

    3. The excessive projects of Gazprom have to be paid by gas consumers of Russia, which would extend the period of the economic crisis in the country. During the previous crisis in 1998-1999, the nominal price of gas in rubles was frozen, while the real price has dropped by three-quarters. Additionally, the Russian government has devalued the nominal debt of Russian gas consumers to Gazprom by 40% (the real debt has dropped by over 80%). Gazprom has suffered losses for two years, but the low domestic price of gas has helped all other businesses to recover faster.

  5. Construction of bypassing pipelines for political purposes is appropriate for a "Ministry for Foreign Energy relations", but not for a company that claims the priority of profit maximization.

  6. All parties, especially the Russian gas consumers, would benefit from the normal relations of Gazprom with neighboring countries based on direct contracts without intermediaries, transparent market prices, as well as transparent market tariffs for gas transit and storage.

Mikhail Korchemkin

January 5, 2009


Last modified: 12/07/14                    East European Gas Analysis 2006-2014                                           Email: info@eegas.com
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