EU ministers to discuss gas supplies as Ukraine transit contract expires

EU energy ministers will meet on Tuesday to discuss imports of Russian natural gas, as the key gas transit agreement between Moscow and Kyiv expires on 31 December.

Source: Bloomberg, as reported by European Pravda

Details: Ministers from 27 countries will meet in Luxembourg on Tuesday, 15 October to discuss how the region is prepared for winter. The need to maintain energy security has already forced the EU to look for new sources of gas supplies, pushed up energy prices, and put pressure on the region's energy system.

Negotiations on replacing transit flows are ongoing, but an agreement does not appear to be close. Sources familiar with the matter report that the final decision is likely to be made at the last minute or even early next year.

One of the options being discussed is replacing Russia with Azerbaijan as a supplier. However, the details of how this would work remain unclear. Given limited reserves, exports from Azerbaijan to Europe would require an exchange with Russia, making such an agreement politically controversial.

Another option is for Azerbaijan's state energy firm SOCAR to take on the role of Gazprom PJSC and sell gas to Europe, or the company could facilitate transit through Ukraine.

The sources report that the volume should be around 10 to 11 billion cubic metres to reach the level required for unimpeded transport through Ukraine's vast pipeline system. Lower volumes would mean additional gas would have to be injected, making the operation unprofitable.

EU gas storage facilities are full and flow via the Ukrainian route, which currently accounts for less than 5% of total supplies to the continent. 

However, for countries such as Slovakia and Austria, finding new sources of imports could mean higher prices, which is not appealing to politicians.

Background: Hungary and Russian energy giant Gazprom are discussing a 2025 agreement on additional gas purchases by Budapest, with plans to use the full potential of the TurkStream to increase fuel volumes.

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