Avoiding Ukrainian natural-gas pipelines would cut OAO Gazprom shipments to Europe by more than a third because there isn’t enough alternative capacity, hurting revenue for the world’s largest gas producer.
The CHART OF THE DAY shows Gazprom shipped 89 billion cubic meters of gas, or 55 percent of its total exports to Europe, through Ukraine last year. About a third of Ukrainian flows could be replaced immediately with added pumping through the Nord Stream and Yamal pipelines, leaving Gazprom with 59 billion cubic meters of gas unable to reach Europe until the South Stream transit system comes on line in five years.
The Ukrainian-Russian conflict revived concerns that European gas supplies are at risk after Gazprom raised prices for Ukraine 81 percent last month and threatened to halt supplies in June unless the country pays past-due bills. Gazprom can’t afford to completely circumvent Ukraine because European sales are about 56 percent of revenue, said Leslie Palti-Guzman, an energy analyst at Eurasia Group in New York.
“We might see some limited cuts in deliveries in June, but they can’t be sustained for a long time,” Palti-Guzman said in a phone interview. “It would be a lose-lose situation for all concerned -- for Russia, for the European Union and for Ukraine.”
Gazprom stopped shipping gas through Ukraine for almost two weeks in 2009, leaving several EU states including Bulgaria and Slovakia without supplies for weeks. As the EU seeks to defend vulnerable members from future cutbacks by upgrading networks to allow supplies to flow from the west, Gazprom has stepped up work on alternative transit routes.
Nord Stream, which pumps gas under the North Sea, opened in 2011 and runs at 46 percent of capacity. Gazprom also plans to complete the South Stream project with European utilities such as Italy’s ENI SpA and France’s Electricite de France SA, by 2019.