Gazprom counts on European gas demand recovery / News / News agency Inforos
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Gazprom counts on European gas demand recovery

Prospects for the exports of Russian gas to Europe remain high

Gazprom counts on European gas demand recovery

The European gas market situation with the current uttermost overstocking is temporary. The demand for "blue-sky fuel" will start recovering in parallel with the inevitable gradual lifting of restrictive regimes in the Old World states imposed over the coronavirus pandemic.

Russia aims to maintain its status of the key gas supplier to the region, despite desperate attempts by liquefied natural gas (LNG) producers to increase supply and competition in the market.

At present, the Europeans are once again actively discussing the standards and possibilities of using the pipeline infrastructure to deliver Russian gas to the EU countries, as well as the fate of the new Nord stream 2 project, which has been implemented by 93%.

Among other things, the focus of regulators is the trans-Baltic export of Russian gas to the EU. And the signals are different here. On the one hand, the German authorities granted an exception to the long-running Nord Stream on May 20, sparing the pipeline the inconvenience of the EU Gas Directive for 20 years. But on the other hand, the German regulator decided there would be no exception for Nord Stream 2. As you know, May 15 witnessed the Federal Network Agency of Germany (Bundesnetzagentur) reject the Nord Stream 2 AG operator's request to withdraw Nord Stream 2 from the scope of Gas Directive amendments.

At the pre-trial stage, the EU general jurisdiction court also rejected Nord Stream 2 AG's claim to appeal against the Directive that extends the Third Energy Package rules to gas pipelines stretching to the EU from third countries, and directly affects the Nord Stream 2 gas pipeline. The court statement says that the claim by Nord Stream AG and Nord Stream 2 AG against Directive 2019/692, which extends internal market rules to gas pipelines from third countries, is unacceptable.

However, there is little doubt about the successful completion of the Nord Stream 2 project. Very soon, Akademik Chersky will start working in the Baltic sea. The pipe-laying ship is currently anchored near the port of Mukran in northern Germany, waiting for the "go-ahead" to approach the wharf for loading pipe sections. Even Bloomberg, which is usually in no hurry to talk positively about Russian energy projects, reported Gazprom would soon bring the Nord Stream 2 construction project to the final stage. And still, the subsequent unimpaired operation of the new trans-Baltic gas pipeline system has been called into questionб with the German authorities' regulatory decisions preventing it from full-scale performance. As well as the notorious European law innovations.

The political "climate" also affects the configuration of Russian gas supplies to the EU along other trunk routes. May 17 saw the lapse of the agreement on gas transit from Russia via the Polish section of the Yamal-Europe gas pipeline to Germany. As Polish gas transport network operator Gaz System informed on its official website, the historic contract ceased to operate at 08:00 a.m. local time (09:00 a.m. Moscow time). The agreement was more than 25 years old.

However, this does not mean that Russian gas supplies have stopped along this route. Gaz System is the operator of a pipe section, as well as the entire gas transport system in Poland. This company will now hold daily auctions until the end of May to ensure gas supplies along the Polish section. In early May, Gaz System already held an auction, offering to book the capacities of the Polish Yamal-Europe section for the third quarter. As a result, about 80% of the available gas pipeline capacities were reserved. It was Gazprom, undoubtedly. The Polish authorities expect that gas supply volume via the Yamal-Europe pipeline from Russia will preserve the same level as before the contract for the transit of Russian gas expired. Their only desire is trying to drive up the tariff, using "innovative" procedures and approaches provided for by European legislation.

In the current situation, it is even preferable for Gazprom to work in the auction mode. This gives it flexibility when choosing transport routes. One way or another, Gazprom focused on maximizing the load of the trans-Baltic route – here the stakes are primarily placed on Nord Stream 2.  Now there is a potential for using the Ukrainian gas transportation system, so the Russian giant can successfully switch its export capacity along the European track.

The Poles themselves are acting in compliance with their traditional anti-Russian policy. And they keep talking about the imminent refusal of the Russian gas. The stake remains on replacing Gazprom's raw materials with American LNG and the Baltic pipe project, which involves pumping gas from Denmark to Poland along the bottom of the Baltic sea. In May, this pipe project accomplished the collection of all the legal permits for launching construction activities.  However, the Poles have yet to discuss with Gazprom its "physical" maritime intersection with the Nord Stream and Nord Stream 2.

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