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Naftogaz contests Gazprom Nord Stream 2 costs

17 Jun 2016 13:33 (+01:00 GMT)
Naftogaz contests Gazprom Nord Stream 2 costs

London, 17 June (Argus) — Transit through Ukraine will be cheaper than Russian state-controlled Gazprom's planned Nord Stream 2 natural gas pipeline after 2020, state-owned Naftogaz has said.

Gazprom plans to shut lines and compressor stations on its central corridor to reduce delivery capacity into Ukraine to 10bn-15bn m³/yr. This would save the firm $1.6bn by the end of this decade, chief executive Alexei Miller said yesterday.

But Naftogaz "estimates" that delivering Russian gas through Ukraine will be "several times more cost-effective in 2020 than via Nord Stream 2", it said.

Costs would be a quarter of those of Nord Stream 2 if 110bn m³/yr of capacity is booked through Ukraine, and a third of the cost if 70bn m³/yr is booked, Naftogaz said.

Gazprom previously said it expected Ukrainian transit to be more expensive. The transit fee for Nord Stream 2 will be $2.10/'000m³ per 100km, while the Ukrainian charge is $2.50/'000m³ over the same distance, Gazprom said.

And the Russian firm forecasts the latter fee to rise to $4.60/'000m³ per 100km, because "Ukraine needs to modernise" its transport network. Ukrainian transit fees will fall in 2020, Naftogaz said.

The Ukrainian regulator has had to hike tariffs to accelerate the amortisation of the network in 2016-19, as "Russian officials have repeatedly announced their intention to discontinue gas transit through Ukraine from 2020", Naftogaz said.

Transmission fees will "drastically decrease" once the infrastructure is fully depreciated, it said. Gazprom and Naftogaz have been in a long-running dispute over their 2009-19 transit and supply contracts.

Gazprom could reduce transit through Ukraine if it commissions Nord Stream 2 and there is a substantial rise in delivery capacity around central Europe. But its use of capacity on new on-shore continuations of Nord Stream 2 could be limited, unless it receives exemptions from EU third-party access rules.

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