Pipeline for Gas Supply of Ukraine helps to transport Russian gas to Europe. However, the agreement for transportation will expire at the end of this year and Kiev has announced that it will not extend or sign a new agreement.
According to the unit operating the gas pipeline of Ukraine, the transportation of Russian gas through Ukraine to Europe has decreased by 28.5% compared to 20.5 billion m3 in 2022 to 14.65 billion m3 last year.
Russia is waging a fierce battle with Ukrainian forces who have launched a surprise attack on the southern border near the large gas transmission center Sudzha - where Russian gas flows into Ukraine.
Two Russian military blogs report that Ukraine has captured a gas measurement facility at Sudzha. Analysts at ING point out that this increases the risk of a sudden stop in the flow of Russian gas through Ukraine.
Currently, Gazprom asserts that it will continue to transport gas through Ukraine and the Ukrainian gas transportation unit also states that operations are proceeding normally.
However, James Waddell - Director of European Gas and LNG at Energy Aspects - believes that there is a risk that Gazpom will reduce the flow of gas during the new round of fighting.
The unit operating the Ukrainian gas system also previously declared force majeure at another entry point of Russian gas, Sokhranivka, and stopped the gas flow in 2022 due to an attack.
Most EU countries have reduced their dependence on Russian gas since the conflict in Ukraine. Previously, the main countries receiving Russian gas through Ukraine included Austria, Slovakia, Italy, Hungary, Croatia, Slovenia, and Moldova.
Currently, Austria still receives most of its gas consumption through Ukraine, while other countries have diversified their sources and implemented measures to reduce demand. Last year, Moldova - one of the poorest countries in Europe - imported all its gas from European markets. Croatia's gas imports are currently very small, and Slovenia's imports have decreased to almost zero after the contract of gas supplier Geoplin with Gazprom expired last year, according to a study by the Global Energy Policy Center at Columbia University, USA.
At the beginning of this year, the European Commission announced that there are alternative gas sources. Austria can import from Italy, Germany, and energy companies in these countries have stated that they have taken preventive measures in case Russian gas supplies are interrupted. Hungary relies on Russian gas but through a different route: the TurkStream pipeline, while Slovenia gets gas from Algeria and other sources.
The Slovak gas supplier SPP states that a consortium of European gas buyers may receive gas at the Russian-Ukrainian border when the Russian-Ukrainian transportation agreement expires. Another option is for Gazprom to provide gas through a different route, such as through TurkStream, Bulgaria, Serbia, or Hungary. However, the capacity through these pipeline routes is limited.
Azerbaijan's presidential advisor revealed to Reuters that the EU and Ukraine have also requested Azerbaijan to facilitate discussions with Russia regarding the gas transportation agreement. The EU has made efforts to diversify gas imports and signed an agreement to increase gas imports from Azerbaijan to at least 20 billion m3 per year by 2027. However, a Reuters source said that infrastructure and finance are not yet ready to facilitate this expansion.
Russia may lose around $4.5 billion per year if gas exports are halted. This figure is based on the average gas price expected to be sent to Europe in 2025, which is $320 per 1,000 m3. According to data from Gazprom, the company's daily gas exports through Ukraine to Europe currently stand at over 40 million m3.
