The results of a year “Gazprom” in the West: Atlas can’t shrug

The results of a year “Gazprom” in the West: Atlas can’t shrug

In 2015 Gazprom continued the fight for projects, intended to deliver Russian gas to Europe bypassing Ukraine. Fortune smiled again “Nord stream”, once again showing the failure of the southern route.

MOSCOW, 28 Dec. Sofia The Janitor. Outgoing world 2015 will be remembered as a year of turmoil, conflict and loss, and in the annals of “Gazprom” it will enter a new Chapter in the implementation of old projects.

Gazprom continued the fight for projects, intended to deliver Russian gas to Europe bypassing Ukraine. Fortune smiled again “Nord stream”, once again showing the failure of the southern route.

Kiev continues to hold “Gazprom” in transit “arms”, despite the fact that in 2015, reached an absolute historical minimum in purchases of Russian gas.

Shades of black

Eight and a half years “Gazprom” tried to offer Europe’s gas supply via the southern route to bypass Ukraine under the Black sea — the first a Memorandum on the implementation of the “South stream” was signed in June 2007. The project has undergone a lot of changes — routes, volumes, recipient countries — all Pereirinhas countless times.

In December 2014 the project gets reincarnated into a new configuration called “Turkish stream”. At last the idea of “Gazprom”, at the bottom of the Black sea was planned to lay four gas pipelines, with capacity of 15.75 billion cubic meters each. The first string of the gas was intended only for the Turkish consumer; the remainder (47 billion) was planned to bring to the Turkish-Greek border.

The degree of readiness for the construction of the black sea route was very high. In mid-2015 it was planned to sign with Turkey an intergovernmental agreement to start laying pipes in the Black sea, and to start the delivery of the first gas in December 2016.

The Turkish authorities on 22 June issued a permit for engineering studies on the project and within a few days pipelay vessel Castoro Sei of Saipem stood off the coast of Anapa waiting for the command of the beginning of construction. But something went wrong and the project was “to melt” in her eyes.

However, in July South Stream Transport (the operator of the construction of the offshore string first “southern” and then “Turkish stream”) announced the termination of the contract with Saipem Castoro Sei and left the black sea waters of the Russian Federation.

Then, in July, “Gazprom” has suspended work on the construction of new “southern corridor” gas pipeline on the territory of the Russian Federation, the gas which was supposed to go in the “Turkish stream”. In October “Gazprom” and even admitted that he considers the only realistic construction of two pipelines across the Black sea.

Amid all these problems, the simple signing of an intergovernmental agreement would be great news, but the process was delayed — first because of the lack of firm agreement Gazprom and Turkish Botas on the discount on Russian gas, then Russia was waiting for the formation of the new government of Turkey.

The Turkish government was formed on 24 November. On the same day, Turkish F-16 shot down in Syria, the Russian bomber su-24. The Russian President Vladimir Putin called it a “stab in the back” by the allies and signed a decree on measures to ensure national security and specmark against Turkey.

In accordance with the decree, in particular, was suspended the work of the intergovernmental Commission of the Russian Federation and Turkey on trade and economic cooperation, co-chaired by energy Ministers of the two countries and in which they discussed joint energy projects, including the “Turkish stream”.

After this, the Russian side admitted that the negotiations on the “Turkish stream” frozen and, if the project needs the Turkish side, it may appeal to the Russian Federation with the corresponding request. However, Turkish President Recep Tayyip Erdogan said that negotiations with Russia on the project were suspended on the initiative of the Turkish side even before the crisis in relations with Russia.


Any progress on the “Turkish stream” without normalization of political relations between Moscow and Ankara impossible, said the Deputy Director of the national energy security Fund Alexei Grivach. In addition, in his opinion, Europe would not want to see Turkey as a transit country of Russian gas. Therefore, with the agreement of Gazprom on the construction of “Nord stream-2” (an export gas pipeline from Russia under the Baltic sea) “Turkish stream” has automatically lost its relevance.

“Revitalization of the “North stream-2” came at a time of transition “South stream” in “Turkish”. Apparently, the West, the project was perceived as a threat. It’s one thing to flirt with Turkey as a transit country of gas from Azerbaijan, and it’s another thing to get very large to transit the canal, which is controlled by Ankara. More than 40 billion cubic meters of gas from Russia through Turkey significantly changed the position of the latter on the world arena,” — says Grivach.

In the perspective of a possible implementation only one thread “Turkish flow” or the option to return to the first thread “South”, but only to Bulgaria, said Grivach.

For 2016 remain open questions performance of Russia and Turkey’s current gas supply contracts in the country.

“Today, deliveries of Russian gas to Turkey carried out within 9 long-term contracts for a total volume of 30 billion cubic meters of gas per year. They contain take-or-pay, which determines the minimum level of gas (on average about 80% of the annual contract volume). This means that if Turkey unilaterally will reduce purchases of Russian gas below the take-or-pay (about 24 billion cubic meters), then for the remaining volume within the volume contracts still have to pay,” says senior analyst, VYGON Consulting Maria Belova.

In addition, Belova recalls that over the last 5 years, gas consumption in Turkey has increased by almost a third and the country now accounts for nearly 100% of the selection gas on all long-term contracts not only with Russia but also with Iran, Azerbaijan, Algeria and Nigeria. “According to our estimates, if the current pace of growth of demand for gas, Turkey may face short-term shortages of contracted volumes of gas in 2017-2018. Therefore, a possible politically motivated reduction of volumes of purchases of Russian gas by Turkey could lead to the shortage of gas in the country”, — emphasizes the expert.

A new beginning

In June 2015, Gazprom agreed with a number of European partners on the construction of a new pipeline from Russia to Europe under the Baltic sea. Against the backdrop of heightened relations with the EU — sanctions, anti-trust case against Gazprom, the legislature conflicts with loading the first two strings of Nord stream — it seemed almost impossible. But in just six months the draft of the Memorandum of intentions turned into quite a tangible construction.

The project involves the construction of two additional branches of the gas pipeline “Nord stream” with a total capacity of 55 billion cubic meters a year, in the amount of the “Northern stream-1” will increase the ability of Russia to export gas to Europe by the Northern route to 110 billion cubic meters a year.

Gazprom will own 50% in joint project company Nord Stream AG 2, which will implement a new project, named “Nord stream-2”. Another 10% will get German BASF and E. ON, French Engie, Austria’s OMV and Anglo-Dutch Shell.

The third and fourth thread “Nord stream” it is planned to put into operation before the end of 2019. The preliminary construction cost of the sea of thread valued at 9.9 billion euros.

The target markets of the “North stream-2” will be, primarily, Germany, France, Italy, and also gas hub in Austrian Baumgarten. According to head “Gazprom” Alexey Miller, via Baumgarten gas “Northern stream-2” can be supplied to the market of South-Eastern Europe, which meant the southern route.

For gas supply in the “Nord stream-2” in territory of the Russian Federation it is planned to construct gas pipelines “Bovanenkovo-Ukhta-2”, “Ukhta-Torzhok-2”, “Pochinki-Gryazovets-2”. In late October, President Vladimir Putin gave start to construction of the gas pipeline “Ukhta-Torzhok-2”, the capacity of which will amount to 45 billion cubic meters per year.


The expansion project “Northern stream” at once there were staunch opponents in Ukraine and friendly countries of the EU. So, the Prime Minister of Ukraine Arseniy Yatsenyuk said that the construction of “Nord stream-2” is anti-Ukrainian and anti-European project. His goal, according to Yatsenyuk, is Russia’s desire to deprive Ukraine of the transit capacity and approximately two billion dollars of transit fees.

At the end of November Lithuania, Latvia, Estonia, Poland, Hungary, Romania and Slovakia have sent to Brussels a letter criticizing the “Nord stream-2”. In their opinion, this project can strengthen Europe’s dependence on Russian gas, to weaken the energy security of Central Europe, and also lead to further destabilization of the situation in Ukraine.

“With regard to the destructive position of some EU countries in relation to the “Nord stream-2”, and the first stream at the time, had problems with almost the same set of countries, which ultimately did not prevent the implementation of the project. “Nord stream-2″ does not contradict the current legislation of the EU, promoted by a consortium of European companies, so we have every reason to believe that, if it will not interfere with big politics, the gas pipeline will be built”, — said Belov from VYGON Consulting.

Autumn kiss

The tense political situation to fully affect the gas relations of Russia and Ukraine. By the end of 2015 we can safely say that “Gazprom” has lost the Ukrainian market, and is unlikely in the near future the situation will change for the better.

In the past year Ukraine broke antirecord, having bought from Russia only 6.1 billion cubic meters of gas. In 2014, this figure amounted to 14.5 billion. Peak procurement was in 2006, when Ukraine has chosen the 59 billion cubic meters of gas from Russia.

One reason for this failure is the difficult financial situation faced by Kiev. The fact that “Gazprom” since 2014 is supplying gas to Ukraine only on prepayment. This condition appeared after Ukraine owes Russia for gas more than five billion dollars, deprived Ukraine of the space with a selection of gas and its payment.

In 2015, the “blue fuel” from Russia warmed Ukrainian consumers a little more than seven months of purchases were in January-June, and then in the period from 12 October to 24 November. Autumn purchase was the result of the agreement between Russia, Ukraine and the European Commission.

So, on September 25, the Russian Federation, Ukraine and the EC initialled a so-called “winter gas package”, is the second in a row. In the document specified mandatory purchase of “Naftogaz” from “Gazprom” gas credit on 500 million dollars attracted using the EC. Ukraine even exceeded this commitment by donating Russia a total of more than 540 million dollars.

Soon Kiev expects to receive another $ 300 million from the EBRD for the purchase of gas and 500 million dollars from the WB. With “Gazprom” at the present time the Ukrainian company is in the process of negotiating the terms of gas purchases in the first quarter of 2016.

This time, Gazprom asked Naftogaz letter of guarantee in amount of purchases until the end of March. According to sources, it is about 2-3 billion cubic meters of gas in exchange for a discount to the contract price of gas to $ 20. As a result, the price of Russian gas for Ukraine in the first quarter may be about 210 dollars per thousand cubic meters.

And there is A

“It is obvious that the purchase of Russian gas to Ukraine in the future will be minimal, but in anticipation of next winter will have to fill up again and again UGS will need to seek funding. Ukraine remains the payment of the loan, which she took under the guarantee of the EC for this winter. Typically, these loans are not long term — it is assumed that they now have money for gas, bought him and return the proceeds, that’s a kind of bridge financing. But the question is — will I get back the money, will she be able to collect them from consumers”, — says the Deputy Director of the national energy security Fund Alexei Grivach.

In addition to the existing challenges in 2015 “Gazprom” and “Naftogaz” got bogged down in a swamp of mutual claims in the Stockholm Arbitration court — their claims to each other at the end of the year was about 29 and 26 billion respectively.

The companies also have an additional factor of rejection in the form of Donbass. From February 2015, Gazprom began gas supplies to Southeast Ukraine after Naftogaz declined to do so. Gazprom believes that these gas supplies should Kiev pay for, but the latter disagree. The Russian side does not rule out that “the bill for the Donbass” can also be sent in the Stockholm Arbitration.