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What will take place when the Ukraine gas transit offer expires?

Ukraine has stated it will not extend a fiveyear deal with Russia's Gazprom on the transit of Russian gas to Europe when it ends at the end of the year, however options are being explored.

Considering that the Ukraine war, Norway has actually surpassed Russia to become Europe's leading pipeline gas supplier and the EU has actually increased liquefied natural gas (LNG) imports from the U.S. and other countries.

WHAT IS THE UKRAINE GAS TRANSIT ROUTE?

The Ukraine gas transit route, concurred upon by Moscow and Kyiv in 2019, allows Russia to export gas to Europe by means of Ukraine.

According to Ukraine's gas pipelines operator, Russian gas transit through Ukraine to Europe fell by 28.5% to 14.65 billion cubic metres last year in from 20.5 bcm in 2022.

Two entry points exist: Sokhranivka and Sudzha, however Ukraine stated force majeure and stopped circulations through Sokhranivka in 2022. The system connects Poland, Slovakia, Hungary, Romania, and Moldova.

WHICH COUNTRIES GET GAS BY MEANS OF THE ROUTE?

Most EU countries have actually reduced their dependence on Russian gas due to the Ukraine intrusion. Previous main recipients of gas via Ukraine include Austria, Slovakia, Italy, Hungary, Croatia, Slovenia, and Moldova. Austria still receives most of its gas via Ukraine, while others have diversified their sources and taken steps to decrease need.

Moldova, one of Europe's poorest countries, last year sourced all its gas from European markets, leaving readily available gas from Gazprom for its breakaway eastern region, Transdniestria.

Croatia's imports are now very little and Slovenia's have dropped to near zero after its primary gas supplier Geoplin's. contract with Gazprom ended in 2015, a research study by the Center on. Global Energy Policy at Columbia University said.

HOW CAN GAS BY MEANS OF UKRAINE BE REPLACED?

EU energy commissioner Kadri Simson stated an analysis has. revealed that alternative supply sources exist.

Austria can import from Italy and Germany, and its utilities. have said they have taken precautionary steps if Russian gas. supply stops.

Hungary has actually been relying on Russian gas from an option. route: the TurkStream pipeline, and Slovenia gets its gas from. Algeria and other sources. Italy gets the majority of its gas. through a route which facilitates Azeri Gas imports and from. Algeria.

ARE THERE OTHER CHOICES FOR UKRAINE TRANSIT?

Slovak gas supplier SPP stated a consortium of European. gas buyers might take control of the gas on the Russia-Ukraine border. when the transit contract expires, but it is unclear how this. may work.

Another alternative is for Gazprom to provide some of the gas. by means of another route, for example by means of TurkStream, Bulgaria, Serbia. or Hungary. Nevertheless, capability via these paths is limited, SPP. informed .

The EU and Ukraine have actually likewise asked

Azerbaijan

to facilitate conversations with Russia concerning the gas. transit deal, an Azeri presidential advisor informed , who. decreased to give additional information.

The EU has been attempting to diversify its imports of gas. and signed an offer to double imports of Azeri gas to a minimum of 20. bcm a year by 2027 however the advisor said the facilities and. financing were still not in place to facilitate this expansion.

Today, Ukraine also signed its very first deal with a

U.S. LNG exporter

to purchase cargoes from later on this year until the end of 2026.

WHAT OCCURS TO UKRAINE'S GAS TRANSIT NETWORK?

Ukraine has actually not imported gas straight from Russia because 2015. but utilizes the transit system to provide homes and businesses. The. system maintains pressure levels for both European and domestic. supply.

Ukraine has experience in managing transit shutdowns - such. as those in 2006 and 2009 - and has tested the system to make sure. it can function if supply from Russia stops.

Ukrainian energy authorities and market sources have. repeatedly stated there is no threat to Ukraine by stopping. transit, saying Ukrainian compressors could pump gas from. storage centers in the west to the east.

JUST HOW MUCH REVENUE WILL GAZPROM LOSE?

Russia might lose around $4.5 billion every year if exports. stop, based upon an expected average gas rate to Europe of $320. per 1,000 cubic metres in 2025. Its daily exports by means of Ukraine to. Europe currently stand at more than 40 million cubic metres,. according to Gazprom's information.

WHAT CAN GAZPROM DO WITH THE GAS?

If Ukraine does not extend the offer, Russia prepares to use. alternative routes and increase LNG exports. Gazprom intends to. boost gas sales to China.

Gazprom began gas flows to China via the Power of Siberia. pipeline in late 2019, aiming to export 38 billion cubic metres. ( bcm) from next year, and eventually to as much as 100 bcm per. year, including 50 bcm through the proposed Power of Siberia 2. pipeline, but negotiations on price and other concerns have. stalled.

(source: Reuters)