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Nord Stream 2 Completed: Why Ukraine might face winter apocalypse

Author : Olena Holubeva

Source : 112 Ukraine

Completion of the construction of Nord Stream 2, which will supply gas from Russia to Germany bypassing Ukraine, could put our country in serious danger this winter
09:46, 10 September 2021

Open source

If Gazprom directs the gas supplied to Europe to the pipes of the new gas pipeline, reducing the volume of pumped through Ukraine to a critically low level, Ukraine will have "black days", even though it will continue to pay for the use of the capacities of our gas transportation system.

The lack of physical volumes of Russian gas in the event of a sharp cold snap in winter, a drop in domestic gas production, and a decrease in reserves in underground storage facilities (UGS) can cause a real disaster in the east and south of Ukraine and lead to the shutdown of large industrial enterprises.

Probably Nord Stream 2 will be launched by the end of the year

Nord Stream 2, a gas pipeline that runs along the bottom of the Baltic Sea and allows gas to be delivered from Russia to Germany bypassing Ukraine, has been a major topic in recent years that neither Ukrainian presidents nor foreign politicians have allowed themselves to be ignored. They repeated that they would not allow the completion of the pipeline, which would eliminate the need for the Ukrainian GTS, since the country not only risks losing income with nine zeros but will also be forced to cut a significant part of the system of gas pipelines inherited from the Soviet Union for scrap metal due to its unnecessary.

Related: Ukraine agrees with Gazprom on 45 bullion cubic meters of gas transit after 2024

Even now, when the contract with Gazprom is still valid, no more than 30% of the Ukrainian GTS capacity is actually used, said Gennady Kobal, director of ExPro Consulting, in a comment to 112ua.tv. Under the current contract, Gazprom exports 40 billion cubic meters of gas per year through the Ukrainian GTS.

The complete loss of transit or its decline to a critical level, as has been said many times, will finish off our GTS. In this case, Ukraine will lose not only money, but also its image and a significant part of its influence in the international arena. Why did the Ukrainian politicians fail to fulfill their intentions and block the construction of their hated rival, the Ukrainian GTS? The answer to this question will most likely be given by historians. Experts believe that a particular government is not to blame.

"I would not hang all the dogs for the period of Poroshenko's stay in power. Nord Stream 2 was completed because all Ukrainian governments have not finished working since the presidency of Leonid Kuchma," says the head of the Expert Council on the development of the gas industry and the natural gas market, Leonid Unigovsky.

The last hope of Ukraine to prevent the threat inexorably approaching the Ukrainian GTS was the visit of President Volodymyr Zelenskyy to the United States. Before Zelensky's visit, Unigovsky said in a commentary to 112ua.tv that the United States could end the existence of Nord Stream 2 by adopting sanctions that would apply to companies that will operate the pipeline.

"As far as I know, such proposals were heard in the House of Representatives. But whether Congress will vote for such a decision is a big question," Unigovsky said.

Related: Ukraine to use underground storages more actively if gas transit drops

Many had doubts that Biden would take such radical steps. Firstly, because of the friendly attitude towards Europe and unwillingness to quarrel with Germany, and secondly, which is no less important, because of the events in Afghanistan, which fundamentally reshaped the international agenda.

As a result of Zelensky's visit, the skeptics became clear. No serious statements were made by the White House or the President's Office regarding the barriers to the launch and operation of Nord Stream 2.

However, one cannot but reckon with the position of Germany, which, despite political statements, all these years has been interested in completing the construction of Nord Stream 2. The launch of this project will make the country the main gas hub in Europe. Now in Ukraine they are already talking about it openly.

"For Germany, this (SP-2) is a commercial project, thanks to which it will be able to gain an advantage among European countries - to strengthen its competitiveness in the global arena, as well as to receive additional revenues after it becomes the largest gas hub in the EU," the press service reports.

And this is one more confirmation in favor of the assertion that Europe and the United States are "friends" with Ukraine when it is beneficial for them, but as soon as it comes to their vital interests, especially economic ones, the rhetoric changes dramatically.

Nord Stream 2 AG announced the welding of the last pipe that will connect the pipeline section from the coast of Germany to the section coming from Danish waters. In fact, this is the final stage of construction. JV-2 has only two obstacles to overcome: to complete certification, which is a prerequisite for the start of gas pipeline operation, and to resolve the issue with European norms, according to which Gazprom may be allowed to use only half of the pipeline's capacity, which will reduce pumping volumes by 27 billion cubic meters per year.

Gazprom can bypass this norm by selling gas on its electronic site, and the point of gas transmission will be the point of entry of the SP-2 gas pipeline into Germany. And then they can fully load both pipe strands. In addition, in the event of a critical situation of gas shortage in Europe, the European Union may give temporary permission to Gazprom to use all 100% of the capacity of Nord Stream 2, and then extend it.

There are also suggestions that if the requirement to use half of its capacity extends to a gas pipeline, Russia could load the remaining 50% by allowing gas to be exported through pipelines, for example, by Rosneft.

But so far everything looks like these arguments do not scare Europe much and Nord Stream 2, in accordance with the expectations of the Russian authorities, will be launched before the end of the year. For its part, Russia has repeatedly stated that the gas pipeline running along the bottom of the Baltic Sea is it, first of all, a commercial rather than a political project, in which the government does not actually participate.

What threatens our GTS in winter

After the commissioning of Nord Stream 2, Ukraine may face another serious threat - the lack of physical volumes of Russian gas in the Ukrainian GTS.

Related: Russia reacts to Zelensky’s words about Russian gas

"As long as there is transit, gas moves from east to west, if there is no transit, then we will have to turn the movement from west to east," Gennady Kobal explained.

The worst for Ukraine, according to Unigovsky, may be a situation in which Gazprom, after the launch of the SP-2, will continue to pay the amount due under the contract (it was concluded with the condition "pump or pay"), but physically gas will not be pumped through Ukrainian pipes... That is, gas will go to Europe through bypass gas pipelines, including along the bottom of the Baltic Sea. In this case, it will be technically more difficult to ensure gas supplies to the eastern and southern regions.

In addition, the absence of Russian gas in the Ukrainian pipeline will make it impossible to swap operations, in which there is no physical import of gas from Europe to Ukraine. The need to carry it out without the presence of Russian gas in the pipe will affect the cost of supplies, making them more expensive.

Open source

Experts are divided on how serious the consequences of a situation in which Gazprom can significantly reduce physical transit may be.

Supporters of the pessimistic scenario believe that this winter will be colder than the winters of recent years. Against the background of falling gas production and high prices for imported gas, in the absence of Gazprom's gas in the pipeline, Ukraine will be forced to shut down industrial enterprises in the east (where the last of the operating industrial giants, including metallurgical plants, are located), as well as in the south, so that there is enough gas for the population and enterprises of the fuel and energy complex that heat apartment buildings.

"If the Russians stop transit, it will really be an apocalypse. The east and south of the country will remain without gas, industrial enterprises will have to be stopped," a source in one of the largest gas supply companies told 112ua.tv.

Even if Nord Stream 2 uses half of its capacity, this could lead to a reduction in transit through Ukraine to a critically low level of 18 billion cubic meters, said Energy Minister German Galushchenko. The minister noted that the drop in physical transit volumes to 15 billion cubic meters. m will lead to the fact that "we will not even be able to maintain our GTS."

In the context of the impending threat, the level of filling of the Ukrainian UGS facilities, from which gas will flow into the system of main gas pipelines, will be of critical importance. If there are sufficient volumes of gas in them, in the absence of Russian gas, compressor stations can maintain the corresponding pressure in the GTS.

Experts point out that it is impossible to deny the fact that not all of the gas in the UGS facility belongs to Naftogaz. Part of the injected volumes is the gas of foreign traders, including the volumes stored in the "customs warehouse" mode. By the decision of the owners, they can be exported from Ukraine at any time.

According to Unigovsky, out of 19 billion cubic meters of underground storage facilities, a little more than 4 billion cubic meters is the gas of foreign traders, and 4 billion cubic meters - buffer gas. And only 11 billion cubic meters is blue fuel, which Naftogaz can operate on.

Related: Transit of Russian gas through Ukraine to continue after 2024, - German Energy Minister

Will transit continue after 2024?

Even if the pessimistic scenario is not realized this winter, the question of what will happen to transit after the expiration of the current contract after 2024 remains extremely relevant. After signing a contract with Gazprom, according to which Russian gas is pumped to Europe now, the authorities announced that they had reached an agreement with the Russian side on the possibility of extending it for 10 years. However, already last year, when the readiness of Nord Stream 2 was brought to 95% readiness, it became clear that this part of the agreement would be implemented with significant adjustments.

It seems that the operator's optimism is not shared by everyone. Taking into account the availability of bypass gas pipelines and the commissioning of Nord Stream 2, even if half of its capacity is used, we can count on guaranteed pumping of 45 billion cubic meters of Russian gas (for comparison, in 2016 - 82.2 billion cubic meters, and in 1998 - 141.1 billion cubic meters), Ukraine is unlikely to be able to.

Do not forget that the loss of transit is fraught for Ukraine and a significant increase in domestic tariffs for gas transportation by domestic gas pipelines. Let us recall that the tariffs developed by the GTS operator in case it was not possible to agree on the current transit contract literally shocked business and ordinary Ukrainians, who would not be affected in the best way by the upcoming increase.

Ukraine has lost the chance to agree on significant volumes of gas pumping through its GTS, burying the idea of ​​the consortium, experts say.

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