Tuesday, May 17, 2022

HomeUkraine-Russia crisisGazprom refuses to reroute additional gas flow after Ukraine calls force majeure

Gazprom refuses to reroute additional gas flow after Ukraine calls force majeure

Gas flows into Europe from Russia were put under further pressure after the Gas TSO of Ukraine (GTSOU) has called force majeure and suspended Russian gas flows via key transit pipeline Sokhranivka that runs through Russian occupied territory in the East of the country transiting almost a third of Russian gas supplies to Europe.

Ukraine, a key transit country for Russian gas has disrupted gas deliveries to Europe for the first time amid rising concerns over interference with transmission operations and unauthorised withdrawals of transit gas.

Ukraine’s gas TSO said in a statement, that flows via the border point in the Eastern Luhansk region, which transited up to 32.6 million cubic meters per day, will be stopped from this morning for an indeterminate period of time. The grid operator said that due to the lack of stability and safety via the Sokhranivka pipeline they couldn’t put current transit contracts through the route without risk.

To fulfill its transit obligation GTSOU confirmed the possibility of transferring gas transit to the entry point at Sudzha located in the territory controlled by Ukraine, the capacity of which is twice as much as the volume under the current contract (109.6mcm per day).

Source:GTSOU

However, Russian energy giant Gazprom said that by leaving only one entry point for transiting Russian gas to Europe Ukraine is undermining the security of gas supplies. Gazprom said it was continuing to meet its obligations to supply gas and therefore saw no proof of force majeure or obstacles to normal flows. Today GTSOU reported that Gazprom, closed the gas valve on the Soyuz main gas pipeline in Russia, thus, the gas transit from the Sokhranivka was stopped.

Gazprom also underlined that it was not technically possible to shift all volumes to the Sudzha route, as GTSOU proposed. The Ukrainian TSO recalled that in October 2020 the Sudzha route have already handled 165.1 mcm a day due to scheduled repairs on the Sokhranovka route.

“While there are alternative pipelines that can take a significant amount of the lost capacity, this is another cut in Europe’s ability to import Russian gas,” commented Rystad Energy analyst, Zongqiang Luo.

According to Rystad the daily gas flow via Sokhranivka is averaged at about 23 mcm per day in May 2022 that is 20 per cent lower than the flow in the previous month. Daily flows via Sudzha have significantly recovered to the same level in Dec 2021 and March 2022, averaging 70 mcm per day in May.

Source: Rystad Energy

“The contracted gas transit capacity at Sudzha based on the existing transit contract of 77 mcm per day, would allow approximately 7 mcm/d volume addition once the gas flow at Sokhranivka is halted. However, based on the historical flow record, another 6 mcm/d on top of that capacity may be added. This leaves 10 mcm/d of gas flow that will still need to be re-directed via other pipeline routes. Where exactly is not clear as capacity is seemingly full,” pointed out Zongqiang Luo.

According to Rystad the most realistic scenario of a complete halt in gas exports from Russia to Europe would be if infrastructure were attacked, yesterday’s decision is a small preview of what might happen if gas installations are hit by live fire and face the risk of extended downtimes.

“The knock-on effect of removing a further pipeline from Europe’s gas grid and the loss of 10 mcm/d of gas flow per day will make it harder for countries to meet their storage targets and hasten Europe’s plans to move away from imports of Russian gas,” said Rystad’s analyst adding that as the European gas grid is well integrated, no one country is likely to suffer any immediate impact, but this will put further strain on the system and place a floor on downside price movement.

European natural gas prices (TTF) briefly approached $34 per million British thermal units (MMBtu) consequently. “Fluctuations in the market are expected, and the TTF started the day with a 5 per cent increase but has since gone back down to 1 per cent below yesterday’s closing levels,” noted Rystad.

GTSOU repeatedly informed Gazprom about threats of transit due to the actions of the Russian-controlled occupation forces and demanded an end to interference in the operation of the facilities, but these appeals were ignored. Kremlin spokesman Dmitry Peskov said Gazprom had not received advance notice of Ukraine’s move.

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