The EU Court Restricted Gazprom’s Right to Use the OPAL Pipeline: Conclusions

Europe tried to put a stick in Gazprom’s wheels. What’s next?

I with pleasure observed the flashes of the latest “victory”, when some in the West and in Ukraine were excited after the news that the court of the EU limited Gazprom‘s use of the OPAL gas pipeline, which is a continuation of Nord Stream.

Nord Stream and OPAL

I with pleasure will comment on this news.

As a reminder, in October 2016 the European Commission approved the expansion of Gazprom’s access to OPAL to 90%, whereas earlier the company had the right to use 50%. Now, at the demand of the Poles, this decision was suspended and now transit along the OPAL pipe has to be reduced to 40%.

I did some searching, read up on the topic, and realised that everything, as always, was a lot of fuss over nothing.

Firstly, the entire current situation is very funny, as it is the pure war of Poland against the European Commission, and the European Commission against Poland in an attempt by the latter to occupy at least some place in Europe’s gas supply.

Secondly, concerning what actually happened. What happened was that Gazprom was deprived of the right to use 90% of the capacity of OPAL, having lowered it to 50%. But such usage was the initial one. The cancelled decision of the European Commission from October 2016 gave to the Russian company the chance to additionally transport up to 10.2 billion cubic meters of gas a year along OPAL, but this is only 18% of the volume that supplies the first line of Nord Stream (or only 9% of the total amount of the first and second Streams).

Let me remind you that the gas along the Nord Stream-1 line through German territory then goes not only along OPAL (to the South), but also along NEL (to the West) and their total capacity is about 55 billion m³. But there aren’t any complains about the NEL branch.

Why aren’t there any complaints? Because Poland was only able to complain about the OPAL pipeline, since in this case Poland allegedly has no opportunity to supply other gas besides Russian – there is no diversification of gas supplies. Although there is NO ONE to fill this pipe besides Russia!

It is foolish to believe that such a scenario, with limited transit along OPAL, wasn’t considered by Gazprom in advance.

Does it affect Nord Stream-2 somehow? No, not in any way.

No way, because for the second stream the OPAL-EUGAL double, the capacity of which will be equal to the same total capacity of the OPAL and NEL gas pipelines — 55 billion³ per year, is under construction. Does this give Ukraine a chance to get a slightly more profitable transit contract? Perhaps, but not nearly as much as Naftogaz dreams of.

This winter, in the absence of transit, doesn’t create problems for Russia, and Russia has the time to complete the second stream. An excessive amount of gas was already pumped to Europe – the gas storages that Gazprom bought in the West are filled chock-full more than ever, “Nord Stream – 1” is in operation.

Plus there is liquefied gas. Liquefied natural gas, after delivery by the tanker to the terminal, will continue to be supplied further along European pipes in the same way. And for the liquefaction of gas, “Gazprom” from near Kaliningrad has already moved to a floating re-gasification plant somewhere in Europe (in my opinion in the area of the Netherlands).

All of this will allow to uninterruptedly supply Europe without the gas transit system of Ukraine until the next season, and it will allow to complete “Nord Stream-2” and to construct a new line of Yamal 480 km overland (an extremely short section on the scale of land pipelines) along which there will be gas from Yamal.

So for Russia this topic is noticeable, but not to the extent that it can worry and influence its decisions. And in order to annoy Russia our “European partners” seem to be ready to not only shoot themselves in the foot, but also to freeze their own balls off.

Further. As I noted, the judgment won’t affect “Nord Stream-2”, but will only partially limit “Nord Stream-1”. But even if it is limited, then it is only on the condition that the OPAL decision is not canceled. A decision on OPAL was already cancelled once before, so what is stopping it from happening again?

In fact, the court’s verdict remains to be studied. There are all grounds for its cancellation. It is important because Gazprom owns only half of the shares of this gas pipeline, i.e., formally there is diversification. It is possible that the appeal will be submitted not by Gazprom, but its German partner. It, in turn, will provide reasonable information that a more complete loading of OPAL doesn’t inflict any transit damage to Poland. This is the first thing.

And secondly, OPAL, in turn, belongs to the German firm OPAL NEL TRANSPORT GmbH, and they are outraged that some countries on the side, using the flag of the EU, try to influence the internal interests of the titular country…

This pipeline is a commercial enterprise. The money of specific shareholders is spent on its construction, and they, due to these games, receive minimum profit, or in general will incur losses.

Does this High Court want to force some producers of gas besides Gazprom to pump its gas through the same pipeline in order to ensure that it is 100% loaded? There aren’t any. Can this court, via the budget of the EU, offset the losses incurred by the owners of OPAL? It can’t. So a bypass mechanism will surely be found, since there are no other OPAL gas suppliers.

So in conclusion.

Nobody will force Russia and Gazprom to pump gas through Ukraine if it isn’t necessary or profitable for Russia both politically and financially.

There is no doubt that at a certain stage of the situation’s development the supply of gas from Russia to Europe via Ukraine will be stopped. And even not for political reasons, but for purely technical ones. The Ukrainian pipeline, which nobody wants to invest in, repair, and support for billions of dollars will simply fail. And forcing Russia to involve itself in it is unlikely to be successful…

If Ukraine thinks that Poland is trying for them, then it is very mistaken. Poland tries first and foremost for itself and catches the small fish. It hopes that gas will not go through Ukraine after all, and that, having tightened the flow of Russian gas, it will force its partners to buy liquefied gas, in particular to force them to do so in precisely Ukraine. But I believe that Poland will not win after all in this.

I think by the winter, when the consumption of gas increases, everything will fall into place, Poland will cease to buy expensive American gas, having understood the futility of its attempts, that it will never be a gas hub. The Europeans are unlikely to buy expensive gas. After all, it will affect production prices. The only thing that the Poles will be able to achieve is is in fact some temporary increase in prices per cubic meter of gas at the same European hubs.

Andryukha Chervonets

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