The European Union’s goal to ban Russian fuel imports by 2027 is facing significant hurdles as nearly half of Russia’s pipeline gas supplies to Europe and Moldova continue to flow through Ukraine.
In 2023, these transit volumes totalled 13.7 billion cubic metres (bcm), raising concerns about the future of gas supply as the current five-year transit agreement between Russia and Ukraine is set to expire by the end of 2024.
Rystad Energy predicts that an additional 7.2 bcm per year of liquefied natural gas (LNG) will be needed to replace the gas currently transiting Ukraine.
This shift could lead to supply disruptions sooner than expected, as highlighted by Austrian company OMV’s recent market warning.
Slovakia, Austria, and Moldova are the European nations most dependent on these transit volumes, importing approximately 3.2 bcm, 5.7 bcm, and 2.0 bcm respectively in 2023.
Moldova, which imported 74 per cent of its gas through Ukraine last year, has been diversifying its supply sources, receiving gas from Romania and through reverse flows via the Trans-Balkan pipeline for the first time.
The potential halt of Russian gas pipeline flows via Ukraine would significantly impact countries relying on these volumes.
Christoph Halser, Gas & LNG Analyst at Rystad Energy, stated: “Without Azerbaijan or another third party transiting the gas following a swap deal with Russia, the EU will require about 7.2 bcm of gas to be sourced from the LNG market.
“Terminals in Poland, Germany, Lithuania and Italy could forward these volumes to the most affected counties, such as Slovakia and Austria.”
To address these challenges, Central and Eastern European countries have joined forces to create a Vertical Gas Corridor under the EU’s Central and South Eastern Europe Energy Connectivity Initiative (CESEC).
On January 19, 2024, a memorandum of understanding was signed in Athens involving EU energy commissioner Kadri Simson and the Transmission System Operators from Greece, Bulgaria, Romania, Hungary, Slovakia, Ukraine, and Moldova.
This corridor aims to utilise existing infrastructure in Ukraine and Moldova and enable LNG imports from Greece and Turkey to reach Slovakia, Hungary, and possibly Poland.
Additionally, Turkey’s transmission system operator BOTAS and Bulgaria’s operator Bulgartransgaz signed an agreement in January 2024 to increase gas entry capacity at the Strandzha 1 entry point.
This expansion could help increase Azerbaijan’s EU gas exports from 13 bcm to 20 bcm per year by 2027.
As the EU continues to work towards its goal of eliminating Russian fuel imports by 2027, these developments highlight the complex challenges and potential solutions in reshaping Europe’s energy landscape.
The coming months will be crucial in determining the future of gas supply routes and the EU’s energy security.
