Nov 22, 2024

Steady Russian gas transit may signal flows in 2025

Russia’s gas exports to Europe through Ukraine have remained steady at around 41mcm/day, data from Slovakian TSO Eustream showed, despite Gazprom’s decision a week ago to cut about 17mcm/day of supply to OMV over a payment dispute.
“This flags that retaining market share – even indirectly – and therefore retaining some revenue is key for Gazprom,” said Tom Marzec-Manser, head of gas analytics at consultancy Icis.
Supply to Slovakia has changed little over the week, while onward shipments to Austria from Slovakia have only decreased by around 10%, data from TSO group Entsog showed.
Most of the gas supply is staying in Austria, said several sources, but some was likely being sold onwards to Italy or Germany, an Italian gas analyst said.
Still needed Despite Europe’s efforts to diversify energy sources since the start of Moscow’s war with Ukraine, Russian gas was still “needed”, he said.
As such, the likelihood of a new transit agreement being forged for next year – after the expiry of the current five-year deal at the end of December – was high, he said.
Icis includes continued Ukrainian gas transit in 2025 in its base-case outlook scenario, despite this not being the consensus, said Marzec-Manser, adding that the continuation of flows despite the OMV cut-off supported Icis’s view.
This could be a first glimpse of how Gazprom could use intermediaries to maintain flows to Europe, he said.
“If Ukraine didn’t want transit at all, they would have slammed the door closed months, if not years, ago. But they are leaving it ajar as they know – quite rightly – they can use it for some leverage for something else entirely,” he said.
A Gazprom-friendly, non-Russian firm could potentially reach an agreement to buy gas at Sudzha on the Russia-Ukraine border, then transport it to Europe themselves, he said.
Willing partners could also seek to buy the transit capacity once the current deal between Russian and Ukraine expires, said Marina Tsygankova, manager of European gas at LSEG.
A source close to a large central European energy firm told Montel recently that the draft of such a deal was “already in the cupboards with the Russians”.
Azeri swap? Jason Durden, head of energy markets at NUS Consulting, agreed. The OMV deal “does show that Russia may be a willing partner in an alternative”, he said, noting that Azeri state-owned gas and oil firm Socar could supply volumes to Europe via a swap deal with Russia.
This was despite Socar’s inability to ramp up production sufficiently to compensate for any significant swap agreement, Montel reported in September.
“If Socar can agree a deal with the Russians and Ukraine then there is no reason why Azerbaijan gas can’t arrive in Slovakia,” said Durden. “It would of course be Russian gas but swapped or sold at the border.”
Ukraine’s energy ministry this week released a letter stating that it had not engaged in discussions with Italy, Austria or Slovakia regarding the extension of gas transit through Ukraine, including the potential transit of Azerbaijani gas.
“[Nevertheless], I think Europe will find a way of rebadging Russian gas,” Durden said.
However, a Germany-based trader disagreed, noting that “Ukraine is not going to accept it. If Russia still sells the gas to someone, that funds the war. It doesn’t make sense Ukraine would [agree to] it.”

Source: montelnews.com