From all sides, Ukraine’s once irreplaceable gas-transit pipelines are becoming marginalized.
Russia is continuing its quest to bypass Ukraine with a new branch of the Nord Stream, expansion of the Yamal pipeline and a South Stream project in the works. While some believe Gazprom's geopolitical influence is on the wane, pressure on Ukraine is unlikely to subside.
Dutch
natural gas firm Gasunie will sign a memorandum with Gazprom on
building a third branch to the Nord Stream on April 8, during Russian
President Vladimir Putin’s official visit to the Netherlands on April
8, Russian business daily Kommersant reported.
Gasunie
is currently a 9 percent stakeholder in the project, which currently
operates at half of its capacity of 55 billion cubic meters. Part of
the additional supplies could go further to the Netherlands or be
sent to Great Britain in liquified form.
Yet
the global expansion of the liquified natural gas market, as well as
strong prospects for the development of shale gas in Central and
Eastern Europe, have led experts to speculate about the decline of
Gazprom as a geopolitical arm of the Kremlin.
Furthermore,
a probe by the European Union commission into price fixing has
spurred a flurry of contract revision in the continent’s eastern
half, where heavily dependent countries can pay over $500 per cubic
meter of Russian gas, compared to $300 in Great Britain.
This
week, the market value of the world’s most profitable company of 2011
fell below $100 billion for the first time in four years and down
from $360 billion in 2008.
With
underused capacity as a major reason behind the falling valuation,
many believe costly investments into new pipelines – particularly
the South Stream, which taps the same gas fields as the Ukrainian
lines but could cost north of $35 billion to launch – to be a bluff
on Russia’s behalf.
This
opinion has been voiced, among others, by German lawmaker Karl
Wellman, who last year called the South Stream a mere silhouette of a
project aimed to scare Kyiv.
Meanwhile,
the Kremlin’s response seems to be that attack is the best defense.
On April 3, Putin told Gazprom CEO Alexei Miller to build a second
section to the Yamal pipeline running through Belarus, the main
source of Russian gas to Poland.
“In
connection with Nord Stream and South Stream, we have abandoned work
on the Yamal-Europe-2 project,” RIA Novosti news agency quoted
Putin as saying “I am asking (you) to return to the Yamal-Europe-2
project.”
Miller
estimated the Yamal-2 project could add a further 15 billion cubic
meters in capacity to the existing 33 by 2018-2019. The South Stream,
which will connect Russia to the Balkans, Central Europe and Italy
via the Black Sea with a planned capacity of 63 billion cubic meters,
is expected to be finished in 2015.
According
to Putin, this would improve the reliability of supplies to Poland,
Slovakia and Hungary. The emerging Central European economies,
particularly Poland, have repeatedly raised concerns about the Nord
Stream, claiming it would allow Russia to maintain supplies to
Germany while starving Ukraine and Poland.
But
Poland has expressed scepticism about the project, with Treasury
Minister Mikolaj Budzanowski saying that “the European Union has no
additional need for blue fuel from Russia.” He added that Russia
would need the consent of local firm Gaz-System to build additional
branches in Poland.
Ukraine,
however, is not taking the changes lying down. Over the past year
Kyiv has made unprecendented efforts to diversify its energy sources
and reduce the power of Moscow’s grip.
On
the one hand, this has meant signing production sharing agreements
for unconventional and offshore gas exploration with international
conglomerates, state subsidies to alternative energy sources, and a
bungled attempt to build a liquified natural gas terminal.
President
Viktor Yanukovych has also actively toured the region in search of
new energy partners, notably with a series of to the Turkmen capital
Ashgabat.
The
prospects of reviving the Central Asian gas route may be somewhat of
a pipe dream – the need to go through Russia or construct a
prohibitively expensive new tract make the project unviable in the
near future.
To
the West, however, the prospects seem a little brighter. A deal with
Germany’s RWE to re-import Russian gas via Poland, launched last
year, launched the process of reverse delivery to Ukraine last year, albeit with still small volumes.
Meanwhile,
a new deal with Hungary, launched during Prime Minister Azarov’s
visit on March 28, could pave the way to a further 5 billion cubic
meters in imports from Europe.
“It
is a big pleasure for me to inform you that today … and this is
great news … the first molecules of Hungarian gas crossed the
Ukrainian-Hungarian border into Ukraine through a reverse flow
system,” Azarov was quoted by news agency Interfax Ukraine.
Officials
have indicated that further options were being explored to open roads
from Romania and Slovakia.
Naftogaz
Ukrainy deputy head Vadym Chuprun, Ukraine recently said that
agreements for reverse delivery from Germany through Hungary and
Slovakia could bring total gas imports from Europe 7 billion cubic
meters in 2013.
In
2012, Ukraine cut imports from Russia by a quarter, down to 33
billion cubic meters. In November Yanukovych announced he plans to
cut Russian gas imports to 18 billion cubic meters in 2013 (albeit
excluding imports by OstChem Holdings, owned by billionaire Dmytro
Firtash).
This
will likely further increase tensions with Moscow, which in January
sent Kyiv a $7 billion gas bill, claiming Kyiv had violated a
take-or-pay clause in its 2009 gas agreement.
Kyiv
Post editor Jakub Parusinski can be reached at
[email protected]
