Russian gas transit through Ukraine after 2019: the options
Gazprom’s pipeline projects that aim to diversify transit away from Ukraine, Nord Stream 2 and Turkish Stream, are very unlikely to be operating at full capacity by 31 December 2019, when the current transit contract between Gazprom and Naftogaz expires. New contractual arrangements must therefore be agreed – and are being negotiated in an atmosphere of unprecedented friction between the companies. Failure to reach agreement would result in supply disruptions; this could undermine further gas’s prospects of becoming part of Europe’s energy supply future, which is already being questioned due to the EU’s decarbonisation strategy. The paper reviews the progress of transit diversification, the state of the negotiations and possible outcomes, and the implications of no agreement being reached. It considers the prospects for transit of Russian gas to Europe up to 2025 and the implications for Ukraine, and argues that, even if and when the transit diversification projects are complete, Gazprom will require some Ukrainian pipeline capacity. A close look is taken at projected volumes, transport capacities and seasonal flow factors. Finally the investment requirements of the Ukrainian transport system, and the influence on this of gas market reforms are considered.