(Bloomberg) – Russia’s Gazprom PJSC is preparing for a scenario where natural gas flows via Ukraine halt entirely next year.
Gazprom’s plans, which are yet to be approved by management, set out a base-case scenario where no gas transits through Ukraine when the current deal ends at the end of the year, according to a person familiar with the matter. Reuters first reported the news.
Although flows through Ukraine now account for less than 5% of the continent’s supplies, some central European countries still rely on this supply and have been exploring alternatives, including a deal with Azerbaijan. But with just weeks left to find a solution, no agreement has been reached yet.
Gazprom declined to comment.
With tensions escalating in Ukraine, whether gas flows on Jan. 1 is becoming a political decision. Moscow has maintained it’s willing to continue to supply gas but Kyiv is reluctant to keep enabling a key source of income for Russia.
European gas markets have been volatile because of the uncertainty about whether an alternative can be agreed to get Russian gas to the region and gas prices in Europe are near their highest level this year. Nations such as Slovakia still depend on the Russian shipments as other supplies, such as liquefied natural gas, would be more expensive.
Should flows stop, replenishing inventories in Europe would be much more difficult next year. Stored fuel is already being used up more rapidly than usual for this time of year after a colder start to winter. Europe, while reducing its dependence on Russian pipeline gas, increasingly depends on imports of LNG from Moscow and also the U.S.
Slovakia has been pitching back up routes should talks fail. But time is running out with new obstacles emerging.
Austria’s OMV AG was cut off from Gazprom’s supply this month after stopping payments following an arbitration award, and the U.S. sanctioned Gazprombank which handles payments for Russian gas supplies in Europe.
This article was originally posted at www.worldoil.com
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