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

Gazprom insists on using more expensive routes to Baumgarten

In 2015, Ukrainian pipelines delivered to the EU border 64.2 billion cubic meters (bcm) of Russian gas, including 37.8 bcm received by Slovakia. Most of the Slovakian flow went to the Austrian terminal of Baumgarten.

Gazprom intends to replace the pipeline route to Baumgarten via Slovakia by the one through Nord Stream 2. According to the company's press-release, Nord Stream 2 would help strengthen Baumgarten's position as a key gas distribution center in Europe. In fact, the Nord Stream route means additional transit fees and lower profits of the shareholders of Gazprom.

Figure 1. Gas pipeline routes to Baumgarten, Austria

In 2015, Gazprom paid for the gas transit services of Nord Stream AG Rub 73,966 Million or $1,219 Million. Nord Stream AG shipped 39.1 bcm of gas, so the transportation cost can be calculated at $31.2 per thousand cubic meters (mcm).

According to Alexey Miller, "the current rate for gas transit via Ukraine is USD 2.5 for 1,000 cubic meters per 100 kilometers". Gazprom-Naftogaz transit contract specifies the gas transportation distance at 1240 km, so the cost of Ukrainian transit is $31.0/mcm.

Therefore, Russian gas hits the EU soil in Greifswald (Nord Stream outlet) at about the same cost as in Velke Kapusany (border of Slovakia and Ukraine).

Figure 2. Transit fees outside of the Russian territory

On the way from Ukraine to Baumgarten, Russian gas has to cross Slovakia. As a matter of fact, Gazprom has booked the capacity from Velke Kapusany to Baumgarten until 2029, so the Russian company will have to pay for Slovakian transit even if there is no gas in Slovakian pipelines.

"Surely, everyone here is concerned about the future of gas contracts after the commissioning of the Nord Stream and South Stream gas pipelines. May I assure you that all commitments under these contracts shall be met. Commitments on gas transit through Slovakia are secured by the “ship-or-pay” condition. Therefore, you can be assured that your country will not be left without transit fees", - deputy head of Gazprom Alexander Medvedev said.

Following the route from Greifswald to Baumgarten, Russian gas needs to be pumped through OPAL (Ostsee-Pipeline-Anbindungsleitung, Germany), Gazelle (Czech Republic), MEGAL (Mittel-Europäische-Gasleitung, Germany) and WAG (West-Austria-Gasleitung, Austria) pipelines. Gas flow can take alternative route through Czech pipelines to Lanzhot.

Compared to the Ukrainian route, the one through Nord Stream 2 requires additional capacity tariffs to be deducted from the price of Russian gas in Baumgarten. On top of that, Nord Stream 2 needs new gas pipelines to evacuate gas from Greifswald (OPAL-2).

Figure 3. "The best route" to Baumgarten

In June 2015, Mr. Miller said that the best pipeline route to Baumgarten is the one that runs across the Black Sea. Considering the improvement of Russia's relations with Turkey, it looks like the Black Sea route is better than the Baltic one now.

Mikhail Korchemkin

East European Gas Analysis

Malvern, PA, USA


August 1, 2016

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