European officials are engaged in discussions to ensure the continuity of gas supply through a crucial Russia-Ukraine pipeline amidst the ongoing conflict, reported Bloomberg, citing sources.
Despite efforts to reduce dependency on Russian gas, several eastern European nations still rely on a pipeline traversing Ukraine for supply.
Go deeper with GlobalData
The current agreement governing the pipeline is due to expire at the end of the year, raising concerns about potential disruptions to Europe’s energy supply.
To address this, European government and company officials are exploring alternatives including the possibility of purchasing and injecting gas from Azerbaijan into Russian pipelines bound for Europe, the report said.
This strategy could help Europe avoid the stigma of buying Russian gas while simultaneously attempting to limit Moscow’s income.
The concept is gaining traction, especially since Ukraine, which earned around $1bn (Hrv40.51bn) from transit revenues in 2021, appears to be supportive.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThese funds are vital for Ukraine’s economy, which has been severely impacted by the war.
Speaking to Bloomberg News, Ukrainian state-backed company Naftogaz’s chief executive Oleksiy Chernyshov said: “There are two factors we should always remember. One is that Ukraine has incredible infrastructure of transit and storage gas, which should be used, and Ukraine is predisposed to use this infrastructure because it brings a lot of advantages.”
Any option including cooperation with Russia’s Gazprom PJSC was rejected by the CEO, who added that importing gas from Azerbaijan “might have some future”.
Requests for comment were unanswered by Socar, the state-run energy company of Azerbaijan.
The Energy Ministry in Baku could not comment.
Meanwhile, the Russian Government did not respond to requests seeking comment and Gazprom declined to comment.
If structured as a swap, this arrangement could theoretically benefit Russia by allowing it to redirect its gas supplies.
Russia has found it challenging to secure new buyers due to its infrastructure being tailored for European deliveries, and China’s tough negotiation stance.
However, the feasibility of using Azerbaijani gas is complicated by the fact that Azerbaijan does not currently have surplus gas production and is already using its pipeline capacity to Europe fully.
Any significant increase in exports to Europe would necessitate infrastructure enhancements and new long-term agreements.
Discussions are still in preliminary stages, and insiders anticipate that decisions will only be made closer to the end of the year, as the deadline approaches and the onset of the European winter heightens the urgency.
Many details remain unresolved, and it is uncertain whether an agreement will be reached, the sources warned.
The evolving situation on the battlefield could also influence the outcome.
According to the sources, Germany‘s Uniper is part of these discussions, although a representative for the company declined to comment.
A spokeswoman for the German Economy Ministry stated that the government is conducting talks within the EU framework.
Slovakia, which could stand to gain from such a deal, has shown interest, with Prime Minister Robert Fico hinting at the possibility after visiting Azerbaijan.
Slovakian state-run gas importer SPP suggested that a consortium of European companies or countries, or a designated third party, might take over Gazprom’s contracted gas deliveries at the Russia-Ukraine border.
Another nation that stands to gain is Austria; its Energy Ministry did not reply to messages seeking comment.
Russia continues to send approximately 15 billion cubic metres of gas to Europe annually via Ukraine, mainly to Slovakia and Austria.
In Austria, Russian gas has accounted for more than 80% of consumption for five consecutive months.
Europe also imports Russian liquefied natural gas by ship and has not imposed sanctions on Russian gas despite ongoing debates.
