Central eastern Europe’s gas flows switch west to east

: Natural gas
25/02/14

Strong import demand in Ukraine and Moldova has shifted regional pricing dynamics and driven a switch to west-to-east gas flows in central and eastern Europe.

Outflows from Slovakia, Poland and Hungary to Ukraine surged to a combined high of 267GWh on 13 February, after Ukraine's Naftogaz started issuing tenders for additional gas on a day-ahead basis on top of previous balance-of-month bookings. Combined outflows at these points were only 30 GWh/d on 1-5 February, but they stepped up significantly afterwards as the weather turned much colder and continued attacks on Ukrainian gas production infrastructure significantly reduced domestic output (see flows graph).

And capacity bookings suggest flows will remain strong. Firms have booked 78 GWh/d at Budince on the Slovak border and 54.1 GWh/d at Bereg on the Hungarian border for the rest of February and may continue to top this up with day-ahead or within-day reservations.

After including receipts from Isaccea in Romania and some transit through Moldova, Ukrainian inflows reached as high as 274GWh on 13 February. But at least some of this gas exited Ukraine again to end up in Moldova, particularly when EU-funded imports to the Transnistrian region ended and Moldovagaz took over supply obligations on 11-13 February. Trading firm Met will supply gas to Moldova from today onwards, probably through Bereg on the Ukrainian border rather than the previously-used route through Isaccea.

After taking into account all of these border flows, Ukrainian net imports reached 229GWh on 13 February, by far the highest this month. With Ukrainian gas storage withdrawals at nearly full capacity, any additional upward flexibility needed in the system will have to come from higher imports.

Higher Ukrainian and Moldovan import demand has not just flipped flows at these countries' borders, but has also drawn in gas from further west. Physical gas flows at Baumgarten on the Slovak-Austrian border flipped towards Slovakia on 12-13 February for the first time since one day in December last year, and before that in December 2020. The end of Russian gas transit through Ukraine, which moved Russian gas across Slovakia to Austria, made the switch more feasible but was still a reversal of average net outflows to Austria of 12 GWh/d on 1-11 February.

And flows from Austria to Hungary at Mosonmagyarovar have stepped up significantly since 7 February, averaging 56 GWh/d on 7-13 February against nearly zero earlier in the month. Mosonmagyarovar was little used since the start of last year, having previously carried Russian gas transited through Ukraine to Hungary, as well as spot purchases when economical.

And while Oberkappel on the German border had already been flowing towards Austria since the start of this month, net inflows jumped to 109 GWh/d on 7-13 February from 52 GWh/d earlier this month.

Significant changes to regional gas price differentials have incentivised this reorientation of flows in central and eastern Europe. The Hungarian and Slovak day-ahead markets each have held a consistent premium to Austria since 6 February, having been at a small discount earlier this month and at larger €1.92/MWh and €0.93/MWh discounts, respectively, in January. Naftogaz has bought the majority of its gas from Slovakia and Hungary, driving up prompt prices to a premium to other neighbouring markets. The Slovak day-ahead market's premium to Austria peaked at €1.40/MWh on 13 February, while Hungary's premium reached €2.64/MWh on 11 February (see price graph).

By Brendan A'Hearn

Ukrainian flows in February GWh

HU, SK day-ahead prices vs AT €/MWh

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