Ukraine reduced the flow of Russian gas to Europe via a major pipeline


Ukraine has reduced the flows of Russian natural gas through its territory to Europe, which has led to higher prices in the center of the still unstable continent Reliance on Russian fossil fuels.

Within hours, there was enough gas moving through an alternate route for prices to plummet again, ending essentially flat on the day.

Analysts and traders said the steady flow indicates that some gas has been diverted to travel through a separate pipeline. It was not clear what actions the Russian and Ukrainian sides took in the loop, but the rapid change demonstrated the resilience of the country’s power grid despite the violence on the battlefield.

The reformulated flows partially offset any lost exports to Europe. It has also enabled Russia to continue to pump gas to its largest customer, and to collect much-needed payments for that gas. Ukraine also benefits: Kyiv continues to make millions of dollars a month in transit fees paid by Moscow war path.

European gas prices jumped early in the day when the Ukrainian gas carrier said it had shut down part of the gas traveling through its territory from Russia to Europe. The company that operates Ukraine’s pipeline network halted the flow of gas through a key entry point in the east of the country on Wednesday, blaming Russian forces’ interference in critical gas infrastructure.

The border crossing accounts for a third of Russian gas exports through Ukraine to Europe and feeds 3% of total gas consumption in the European Union. An increase in the flow of Russian gas through a separate section of the pipeline in the territory under the control of Ukraine near the city of Sumy partially offset the stop, limiting price increases.

Europe is working to boost its energy supplies before Tuesday An embargo on Russian oil in the European UnionIt is being split this week. Some member states, notably Germany, have also rushed to find alternative supplies of gas amid a threat of possible export cuts by Moscow. Despite these moves, Europe remains heavily dependent on Russian gas, a piece of which flows through Ukraine. This gas has continued to move ever since Invasion of February 24 Despite the raging conflict.

Ukrainian energy officials say Russia appears to have avoided deliberate strikes on revenue-generating pipelines Russia’s battered economy, although severe damage to Ukraine’s domestic gas network has left millions of residents without fuel. Ukraine, for its part, gets a transit fee from Moscow for transporting Russian gas to customers in Europe.

Wed cut off at the Sukhranivka entry point, on the border between Luhansk region in the Donbass And Russia, the biggest cut in gas supplies to date. This came as Russia continued its campaign to seize the Donbass region in eastern Ukraine.

Ukraine’s pipeline operator said on Tuesday it had stopped the flow of gas through Sukhranivka because it had lost control of the Novobskov gas compressor station near the Russian border. Ukraine’s gas transportation operator said Russian forces interfered with the pipeline network, including by withdrawing gas, in a way that endangered the stability of the broader system.

Russia “always fulfills contractual obligations and intends to fulfill them,” Kremlin spokesman Dmitry Peskov said at a press conference on Wednesday. A Gazprom spokeswoman did not respond to a request for comment. A Gazprom spokesman said in a statement on Tuesday that Ukrainian gas specialists continued to work at Sukhranivka and Novopskov and that it was impossible to pump gas through another entry point.

But analysts and traders said gas flows appeared to change on Wednesday. Soon after the gas cut, the gas moved in larger quantities through a separate entry point in the Ukrainian-controlled territory near the city of Sumy.

Ukraine has several hubs for receiving Russian gas, but there are only two points for entering into the country’s current contract with Gazprom, an agreement that was agreed upon in 2019, according to the head of Ukraine’s state gas company, Naftogaz, and the pipeline network operator.

The two executives, at a briefing on Wednesday, told reporters that Ukraine had asked Gazprom to increase flows through the alternate line to make up for the stop in Luhansk. They said that in the past years, Russia has transported much more gas through the alternative route than it is currently sending.

Despite the war, Gazprom has continued its contractual payments, called transit fees, to Ukraine for the right to send gas across the country, Yury Vitrenko, CEO of Naftogaz, said. In 2020, the annual gas transportation capacity provided by Ukraine to Gazprom amounted to $2.1 billion, according to Naftogaz. Analysts estimated the 2019 five-year contract between Gazprom and Naftogaz, covering the period from 2020 to 2024, at $7.2 billion.

The executives said Ukraine’s contract with Russia does not prohibit the redirection of supplies to Ukraine. If Gazprom intentionally restricted supplies to Ukraine, it would supply less gas to customers in Europe, Mr. Vitrenko said: “This is likely to be the first case of so-called self-sanctions by Gazprom and Russian entities.”

If the road to Ukraine is completely cut off, it will pose a huge challenge to the European economy, which is used to running on cheap Russian energy.

Moscow over the past two decades has sought to bypass Ukraine, building the Nord Stream pipeline under the Baltic Sea to Germany with the help of Berlin. This subsea pipeline is now the main route for Russian gas to the European Union. Another option is Yamal, a pipeline that runs through Belarus and Poland. However, nearly a third of Russian gas pipeline exports to the EU still passed through Ukraine in the last quarter of 2021. The EU buys about 40% of the gas it burns to heat homes, ignite factories and generate electricity from Russia.

The stop in Luhansk increases tension among energy traders who were shaken in late April when Moscow Stop gas exports to Poland and Bulgaria. Gazprom said it did not receive payments in rubles from the two countries as required by decree of the president

Russian President Vladimir Putin.

As Europe races to wean itself off Russian energy, US natural gas producers are struggling to meet demand and prices are rising. Factors, including extreme weather and equipment needs, created a bottleneck amid the war in Ukraine. Illustration: Laura Kamerman and Sharon Shea

The European Union is working to ban Russian coal and is working on a deal that would also phase out oil imports. However, natural gas was not targeted because it is the most difficult source of fuel for Europe than anywhere else.

The European Union and the United States have pledged to expand exports of liquefied natural gas to Europe through 2030. But the United States is already sending everything it can to Europe, and industry officials say increasing volumes will require billions of dollars in new export terminals. In Europe itself, LNG import capacity unused last year could replace just under 29% of gas supplies through Russian pipelines, according to Natasha Fielding, an analyst at Argus Media.

write to Joe Wallace in Joe.Wallace@wsj.com Jenny Strasbourg in jenny.strasburg@wsj.com

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