However, those volumes will likely reach markets only by 2050. ![]() Thanks to its vast landmass, Ukraine can produce large amounts of biomass, which could be converted into 20 billion cubic meters (bcm) of natural gas annually. One solution would include scaling up Ukraine’s production of biomethane, whose molecule is identical to natural gas, and ramping up east-to-west exports to Europe. This means that in the absence of a renewed contract, the Ukrainian gas transmission system operator will have to dismantle vast parts of its network and find new sources of revenue to survive. While Ukraine’s income from the gas transmission is much reduced compared to the substantial profit it made prior to the war, it still represents around 80% of the annual revenue of the gas transmission system operator, GTSOU. However, since May 2022, when it reduced supplies via Ukraine, it has been paying around 30% less. Under the terms of the current contract, Russia is expected to pay around $1bn annually irrespective of whether it actually ships the gas. The only three countries that will suffer as a result of the transit contract expiration would be Ukraine, the Russian-occupied Transnistrian province of Moldova, and Russia itself.įor Ukraine, the loss of transit to European customers will mean a loss of revenue. Not even countries such as Austria and Hungary, which currently rely heavily on Russian gas, should be at risk if they secure alternative supplies elsewhere and ensure optimal access to transport capacity, as explained in a recent CEPA article. With additional gas importing capacity being deployed across the EU and a rising tide of liquefied natural gas (LNG) expected to reach global markets by 2025, Europe should, in fact, be heading for a period of oversupply and a return to cheap energy prices. Now it seems Russia has changed its mind, and that Ukraine’s transmission system may not be that old, nor terribly leaky after all.Īt the start of June, deputy foreign minister Mikhail Galuzin warned Europe it may be in for more tough times if Ukraine refused to renew the existing contract, which is due to expire at the end of 2024. ![]() Remember when the Kremlin insisted the Nord Stream pipelines must be built because the transit network passing through Ukraine was old and leaky (while oh so accidentally slashing that country’s budget revenues)?
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