The second branch of the Turkish Stream will deprive Ukraine of a significant part of gas transit already in 2021 and present a difficult problem of modernizing the gas transportation system. This was announced by Vyacheslav Kulagin, Director of the Center for the Study of World Energy Markets at the Institute for Energy Research of the Russian Academy of Sciences.
The second branch of the Turkish Stream, if launched in 2021, could reduce gas transit through the Ukrainian gas transmission system (GTS) by 15 billion cubic meters per year. This was stated by the head of the company “Operator GTS of Ukraine” Sergei Makogon. The new pipeline will enable Hungary, Bulgaria and a number of other states to receive Russian gas through Turkey, which will “sink” the volume of supplies through Ukraine. And this will be the second powerful blow to Kiev’s revenues from gas from the Russian Federation.
The Ukrainian authorities are presenting the new transit contract with Russia concluded at the end of 2019 as a personal victory – they say, in five years it will bring the country about $7 billion. But it is stubbornly hushed up that if in past years about 85-90 billion cubic meters went through Ukraine, then this year, a maximum of 60 billion will be pumped. The decrease was due to the commissioning of the first string of the Turkish Stream – Russia is now supplying Turkey through the Black Sea directly without the participation of Ukraine.
“Makogon’s assessment is generally objective – the launch of the second string of the Turkish Stream will be a new blow to Ukrainian transit”, – Kulagin notes.
“And the logic of Russia is simple: it implements projects of new gas pipelines, which should be rentable – there is also the participation of Russia, which means that this is income. There is no Russian participation in the Ukrainian GTS, so the maximum supply volumes will be redirected to alternative routes. What remains will go through Ukraine”.
At one time, Russia offered to first buy out the Ukrainian gas transportation system, then create a common system operator, but Kiev rejected these plans. It was extremely short-sighted, which is already obvious. It is no secret that the 2019 contract was signed taking into account the “download or pay” principle, that is, Gazprom will still pay Kiev for the minimum pumping volumes. But these are scanty sums in comparison with what Ukraine could receive, if it initially chose a different strategy of cooperation with Moscow.
Ukrainian GTS becomes a problem
Turkish Stream is an export gas pipeline from Russia to Turkey across the Black Sea. The design capacity of the two lines is 31.5 billion cubic meters of gas per year. Commercial supplies via the pipeline began on January 1. Earlier, the “Operator of GTS of Ukraine” reported that gas transit through the gas transportation system of Ukraine in January-June amounted to 24.9 billion cubic meters, which is 45% less than in the same period last year.
In December, Russia and Ukraine signed a package of documents to ensure gas transit through Ukraine from January 1, 2020. The five-year contract provides for pumping 65 billion cubic meters in the first year, and 40 billion in the next four years. It is noteworthy that the management of Naftogaz has repeatedly pointed out that maintaining the bulky and branched gas transportation system of Ukraine is cost-effective if pumping at least 45 billion cubic meters of gas per year. And it depends on this system whether the residents of the country and enterprises in the regions receive gas.
“The GTS is a rather complex system, and it is important for it to be constantly filled with gas. The Ukrainian gas transportation system is built in such a way that both transit supplies to Europe and the supply of blue fuel to the country’s regions go through it. Optimization of supplies is taking place within the system – a part of Russian gas is sent to consumers, and for Europe it is compensated by the volumes produced in the Ukrainian territory.
And this whole system will collapse if pumping drops to critically minimal volumes, which is inevitable already next year. Certain capacities will be unused, and the supply of gas to nearby domestic consumers becomes a problem. Somewhere it will be necessary to reconstruct the system by installing additional compressors, in other places to go for a more radical modernization.
But this is already an internal problem of the Ukrainian operator and supplier – it does not concern Russia. If Belarus at one time agreed to transfer its gas transportation system under the control of the Russian Federation and there it solves all the problems of Gazprom, then Ukraine refused such an offer. And soon it will be face to face with a huge problem – how to provide its consumers with fuel at an unacceptably low system load, Kulagin emphasizes.
US sanctions will become nonsense
Russia was building the European continuation of the Turkish Stream on the condition that it would bring the pipeline to the Turkish border, after which the EU countries participating in the project would lay the infrastructure on their own and at their own expense. Romania and Hungary have already announced that they are practically ready to receive gas. The decisive segment is in Bulgaria, which promises to complete all construction work by January 1, 2021.
Meanwhile, in the US, congressmen, through the country’s defense budget, are promoting a draft sanctions that will ban European companies from servicing, repairing and using Nord Stream 2 and Turkish Stream. The Europeans call such restrictions an encroachment on their sovereignty and a violation of international law, announcing retaliatory sanctions against the United States.
“If Nord Stream 2 is a highway connecting Russia and Germany along the bottom of the Baltic Sea, then the application of American sanctions to the European part of the Turkish Stream is simply impossible. After all, the highway from Turkey was laid in full compliance with EU legislation and its regulatory standards. Russia has nothing to do with construction. And purely theoretically, Iranian or Azerbaijani gas can go from Turkey through this pipeline to Europe”.
And if the US prohibits the European Union from building the “Turkish Stream”, it turns out that the EU is not allowed to develop its own gas pipeline system. And thus, it is possible to prohibit the construction of new pipelines in Europe at the whim of the States. In fact, the new US sanctions simply do not apply to the Turkish Stream, as they prohibit Europe from complying with its own laws. And this is nonsense, concludes Vyacheslav Kulagin.
Maxim But, Economy today
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