Gazprom says new year 2020 will be "fun" / News / News agency Inforos
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Gazprom says new year 2020 will be "fun"

Uncertainty about the Ukrainian transit remains

Gazprom says new year 2020 will be "fun"

In early July, pipe installation under Nord Stream – 2 in the Baltic sea exceeded 61 per cent. And now the threat of US sanctions is less critical for the project. There is no doubt that in case of problems with contractors, Gazprom is able to complete the construction single-handedly. Moreover, project financing has already been nearly 90 per cent chosen, with both the company's own funds and partner interventions taken into account.

However, these circumstances (almost complete funding and a generally high readiness of the gas pipeline project) seem to be neglected by Washington, with new countermeasures against the project were announced on June 27: the United States House Committee on Foreign Affairs approved sanctions targeting Nord Stream – 2 and other Russian gas pipelines.

The bill stipulates blocking the assets of individuals and companies that provide pipe-laying ships for offshore projects. By a unanimous decision, the amended initiatives were sent to the House of Representatives, Chairman of the Committee Eliot Engel said.

On approval, this document will still require positive endorsement from the Senate and the President of the United States. Only then will it become a law. So here bureaucratic acrimony is highly probable. Moreover, US leader Donald Trump has long been equipped with an option of imposing sanctions on a gas pipeline and within the pool of existing sanctions against Russia. However, Trump does not do this and will unlikely rush to sign the new package, realizing that in the end, the "out-of-date" sanctions won't reach the goal and the Nord Stream – 2 project will be most probably implemented.

But the planned terms of putting the system into operation may be affected by the stance of Danish regulators who haven't given the go-ahead to laying the gas pipeline along any of the three possible routes. At that, the number of applications is one fewer. In late June, the project's operator Nord Stream 2 AG decided to withdraw its 2017 bid for laying the pipes in the territorial waters of Denmark south of the Bornholm island. This step was necessary, since over the two years after submitting the application the former government of Denmark had failed to demonstrate that the decision would be made after all, Chief Executive Officer at Nord Stream 2 AG Matthias Warnig stated.

The initial bid withdrawal, according to the operator, should protect Nord Stream – 2 AG, its shareholder (Gazprom) and European investors "from the risks of further delays and possible financial losses".

The other two applications (for routes running northwest and southeast of Bornholm, but outside the Danish territorial waters) remain in full force and effect. Delays in issuing a permit by the Danish authorities to lay the pipe cast doubt on Nord Stream – 2 project commissioning before the end of 2019.

And the possible rescheduling of Nord stream – 2 completion plays into the hands of Ukraine –the transit agreement between Gazprom and Naftogaz will be only valid until January 1, 2020. And since Gazprom needs the capacity to supply gas to Europe, the Ukrainian side's negotiating position on the transit terms after 2019 seems to be strengthening. Even though the annual press conference of the Gazprom management after the shareholders' meeting witnessed company head Alexey Miller improvise in this regard, saying that the new 2020 year's reception may be fun as usual.

And so far, there is no rapprochement between Gazprom and Naftogaz on the terms of gas transit to Europe after December 31, 2019. All the discussions have been adjourned until fall and will be held in the triangle format, through the mediation of the European Union. As a result, they can prove hollow, with a compromise being difficult to find. Given the impressive difference between the parties' positions, Naftogaz entirely repulses Gazprom's offer to reset the dialogue (reducing the claims to nothing).

Therefore, the Russian company is already seeking to prevent the gas supply crisis in Europe, rapidly filling European underground gas storage (UGS) facilities so that at least the first quarter of 2020 could pass without pumping the "blue-sky fuel" through Ukraine's natural gas transmission system.

By the upcoming heating season Gazprom plans to nearly double the European subsurface reservoir contents as compared to the last year – up to 11.4 billion cubic meters. The accumulated reserves should be enough to cover the winter peaks of seasonal gas consumption by the countries of Europe, even under conditions of the Russian giant's transit capacity deficiency.

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