Route Redesign: Gazprom Stopped Transit through Poland

On Tuesday morning, gas pumping through the Yamal-Europe transnational pipeline completely stopped. By mid-afternoon on Wednesday, transit showed weak signs of life – Germany had received about 100,000 cubic meters of gas, but it stopped again on Thursday. The material of RIA Novosti looks at why the Poles once again punished themselves.

Ended badly

According to the German gas transportation operator “Gascade”, fuel through the Yamal-Europe pipeline stopped entering Germany on May 26th at 8 a.m. This didn’t surprise anyone.

Recall: On May 18th Gazprom’s transit agreement with Poland, concluded for 25 years, expired. As this date approached, there were growing statements in Warsaw that any new agreement needed to dramatically increase the pumping tariff.

Thus, last August, the Polish Government Commissioner for Strategic Energy Infrastructure, Piotr Naimski, reported that due to the low tariff in the last eight years alone, the Polish budget had lost $400 million. The tariff, in his opinion, should have been increased many times.

But it was obvious to everyone in winter: Warsaw’s plans to take several additional billions of dollars from Gazprom failed. The Russian gas company didn’t even enter into negotiations over a new long-term contract. The Poles only have to make a good face at a bad game and announce that they are moving to work according to European standards: they will sell pumping capacity at auctions.

At the same time, the head of the Polish state oil and gas company PGNiG Piotr Woźniak was dismissed: he was made a scapegoat for the fact that the country lost guaranteed stable revenues from transit. Although it was immediately clear that under the current conditions the Yamal-Europe pipeline is no more than a backup option for Gazprom.

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It is not profitable for an exporter to reduce transit through Ukraine, along Turk Stream and Nord Stream, as it is necessary to pay for capacity regardless of the volume of pumping. And thanks to the auction system, the Polish route can be used based on current needs.

In today’s market conditions, when gas supply in Europe far exceeds demand, it meant a sharp reduction in pumping through the Yamal gas pipeline. And this is what happened: as of May 19th, PGNiG had 93% of its transit capacity reserved, as of May 20th- 79%, as of May 23rd – 33%, and as of May 24th and 25th – 10%. Yesterday, transit stopped completely.

At the same time, the load of “Nord Stream” in May increased to a maximum – about 200 million cubic meters per day, almost 15% more than in May last year. On average, 150 million per day goes through Ukraine – 85% of the capacity established by the new transit agreement (178 million).

Change of tone

Last week, the PGNiG held an auction for transit in the third quarter. It was quite successful: 80% of capacity was reserved. “There is a client that uses a new mechanism. It is possible to assume that this is ‘Gazprom export’,” said Piotr Naimski to journalists.

The Russian gas company expects that by then the quarantine will be over and economic activity in Europe will resume. In addition, the accumulation of reserves for the upcoming heating season will begin, so that demand will grow.

But until July 1st, Polish transit capacity will be distributed at daily auctions, and it is not necessary to count on Gazprom being strongly interested. At the end of April, head of the Foreign Economic Department of the Russian company Aleksandr Ivannikov said that it seems that gas exports to the far abroad in 2020 will amount to 166.6 billion cubic meters. Last year it was 199 billion.

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The falling volume of 32.4 billion cubic meters almost corresponds to the capacity of the Yamal-Europe gas pipeline. Of course, the reduction will affect both the Turk Stream and Ukrainian transit. Perhaps even Nord Stream. But Poland loses out the most.

It is no coincidence that the new head of the PGNiG, Jerzy Kwieciński, softened the anti-Russian rhetoric last week. “It is important for us that relations with Gazprom are business-like, and that they are as non-political as possible, although in history this happened differently,” he said in an interview with the leading Polish newspaper Rzeczpospolita.

But earlier, the Poles declared the need to stop all cooperation with the Russian gas company. As they say, sense the difference.


Maksim Rubchenko

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