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

Ukrainian transit represented no threat to consumers in southern Russia

Responding to my letter to the Financial Times, Sergei Kuprianov of Gazprom said that the Sokhranovka-Oktyabrskaya pipeline was absolutely necessary for the secure supply of consumers in southern Russia. This is not correct. Ukrainian transit represented absolutely no risk to consumers in southern Russia because of the specific seasonal load of the Ukrainian pipelines in question. The transit flow peaked every summer, when Gazprom was injecting gas into its huge underground storage facilities in the south of the country. In winter, storage gas was delivered to consumers and the transit flow dropped to nearly zero.

Until 2007, southern Russia was supplied by local gas production (including the Astrakhan field) and by gas pipelines from Frolovo, Central Asia (via Astrakhan) and Novopskov (Ukraine). As shown in the chart below, the Ukrainian pipeline section between Novopskov and Oktyabrskaya was loaded from April to October and had an insignificant flow in winter.

In a hypothetical case of wintertime interruption of transit flow, Gazprom could easily replace the lost volume by storage gas. The combined daily withdrawal rate of the four underground storage facilities in the Krasnodar and Stavropol regions exceeds 220 million cubic meters (mmcm) compared to 1 mmcm/day shipped through Ukraine.

A summertime interruption could not be considered a threat to Russian consumers neither, because the low summer demand can be met by supplies via other pipelines and the storage injection period can be extended by a few weeks. Even in case of complete and permanent closure of Ukrainian pipelines, there was no risk for the consumers of southern Russia. Cessation of Russian gas exports to and through Ukraine would have freed enough pipeline capacity for secure supply of southern Russia any time of the year.

On the economic side, a billion-dollar project with a 12% return can hardly beat an existing alternative that costs $40 million a year. Moreover, Gazprom was able to compensate a part of the $40 million by the sales of fuel gas burned at the Ukrainian compressor stations. After the commissioning of the bypass line, this revenue was transformed into an operating expense because Gazprom started to burn fuel gas at its own compressor station. 

Therefore, the Sokhranovka-Oktyabrskaya pipeline is an uneconomic project that has absolutely nothing to do with the security of supply.

Top Russian officials brand gas transit states as “parasites”. In my view, the Sokhranovka-Oktyabrskaya project is the first step in the realization of the "parasite-free" gas export plan of the Kremlin. As the head of international business department of Gazprom said about another bypassing pipeline, the project implementation should proceed regardless of political and financial conditions. Apparently, money is no object.

Mikhail Korchemkin

East European Gas Analysis

Malvern, PA, USA


March 9, 2011



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