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


Nord Stream and South Stream to affect Russian gas exports


Nord Stream and South Stream pipelines have to be filled up. Otherwise, the projects' partners will lose money. To load the pipelines, Gazprom is diverting the existing export contracts to new routes. For example, November 2008 agreement between Gazprom and SPP (Slovakia) foresees the reduction of transit flow to the Lanzhot terminal (Slovakia-Czech border) in 2011-2013, when the Nord Stream and OPAL pipelines get operational. Gazprom officials claim that the South Stream pipeline will be fed by existing contracts too.

The diversion of export flows will lead to a sharp drop in transit flows through Ukraine and partly Belarus. Having the combined transit capacity of over 175 bcm/yr, by 2020 Ukraine and Belarus may be competing for a mere 40 bcm of transit flow of Russian gas to Europe. Gazprom will be exporting the rest by Nord Stream, South Stream, Blue Stream and to Finland.

The reduction of transit flow will lead to a much lower demand for fuel gas for compressor stations. When South Stream reaches its full capacity of 63 bcm/yr, the combined demand for fuel gas in Ukraine (more likely) and Belarus (less likely) will drop by 3 bcm/yr. At the current export price of Ukraine, it means Gazprom's loss of $800 million of revenue a year. The loss of sales of fuel gas to Slovakia and Romania will be compensated by increase of sales to Bulgaria, Serbia and Greece.

On the other hand, Nord Stream and South Stream will increase the use of fuel gas within the Russian Federation. The two inlet compressor stations of the offshore pipelines will use nearly 2 bcm/yr of fuel gas.

The South Stream project will cost Gazprom at least $10.5 billion of investment out of Russia. To feed South Stream, Gazprom needs to build 2300 km of new pipelines and to install 1473 MW of compressor capacity in the territory of the Russian Federation. There is no shortage of export capacity. After the completion of Nord Stream, the combined capacity of export pipelines will exceed 250 bcm/yr, compared with 139 bcm exported to Europe last year. The huge investment into the South Stream project does not make any commercial sense. It will result in higher operating costs and lower revenue. Though the project does make a lot of sense for the pipeline contractors and brokers of Gazprom.

Mikhail Korchemkin

East European Gas Analysis

Malvern, PA, USA

 

February 15, 2011

 

 

 


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