Opinion: Crisis management

Time is running out for Gazprom to find a solution that ensures sufficient Russian gas supplies reach Europe to meet demand in winter 2019-20. Growing uncertainty over the immediate viability of Gazprom's new Ukraine bypass pipelines and the lack of progress in negotiating a new deal for Russian gas transit through Ukraine to Europe mean an increasing risk of supply disruption.

Gazprom will almost certainly fail to start up its 55bn m³/yr Nord Stream 2 pipeline to Germany this year, as planned, because of delays to approval of a route through Denmark's waters — the firm has warned of the resulting negative consequences for European consumers. And Gazprom may have completed both legs of its 31.5bn m³/yr Turkish Stream line, but the infrastructure needed to carry gas to Europe from the Turkish border will not be ready in 2019.

Gazprom shipped 86.8bn m³ of gas to Europe and Turkey through Ukraine in 2018, but its transit contract expires at the end of this year. The next round of talks over a new deal is not scheduled until 16 September and, given slow progress of negotiations to date, without an 11th-hour deal, the potential "nightmare scenario" — no Nord Stream 2 and no transit deal with Ukraine — identified by a senior Gazprom executive in May is increasingly possible. Gazprom insists that any supply shortfall in Europe could be covered by LNG, although this is hardly a long-term solution — it would be expensive and logistically complicated.

But there is little risk of supply disruption on the scale experienced during the 2009 gas crisis between Russia and Ukraine — which hit Slovakia, Bulgaria, Serbia and Greece particularly hard — as a result of contingency measures taken since.

Gazprom's 55bn m³/yr Nord Stream 1 link started up in 2011, reducing Russia's reliance on Ukrainian transit, and Serbia commissioned the 450mn m³ Banatski Dvor storage facility that same year — now, among countries importing Russian gas through Ukraine, only Slovenia, Bosnia-Herzegovina and Macedonia do not have storage capacity. And cross-border links in central Europe have been greatly enhanced, including construction of a Slovakia-Hungary interconnector in 2015.

Historically, Gazprom has sold around 32bn m³ to Europe and Turkey in January-February, depending on demand, and storage capacity in European countries buying Russian gas, excluding the Baltic states, is around 87bn m³. Hungary, which has 6.3bn m³ of active storage capacity, has this year already taken 4bn m³ of its 2020 supply from Gazprom to inject into storage.

Active measures

The Russian firm itself plans to have at least 11.4bn m³ of active gas in storage facilities across Europe by 1 October — the start of the 2019-20 winter heating season — nearly double the amount it held a year ago and up from stocks of less than 3bn m³ before winter 2009-10. And Gazprom is ready to inject even more, given an opportunity to do so, it says.

Deliveries to Turkey through the first 15.75bn m³/yr leg of Turkish Stream should start by the end of this year — removing the need for around 14bn m³/yr of transit flows to the country through Ukraine and Bulgaria. Bulgaria — where the continuation of Turkish Stream's second leg will not be ready until 2020 — is making arrangements to receive gas in reverse mode from Turkey through the line that now carries Russian transit gas. And a similar process could potentially enable shipments on to Serbia through the existing network in Bulgaria.

Gazprom's customers in southeast and central Europe may now be cushioned against supply disruption. But the underlying problems — longstanding economic and political tension between Russia and Ukraine, exacerbated by divisions within the EU about how best to ensure supply security — remain as intractable as ever.