Kiev ended the transit of Russian gas to the EU on January 1 after refusing to extend a five-year contract with Moscow
Kiev’s decision to block natural gas flows from Russia to European consumers is expected to increase prices for liquified natural gas (LNG) and boost competition for alternatives between Europe and Asia, Bloomberg reported on Thursday, citing an energy expert.
Russia was forced to officially suspend gas transit to the EU through Ukraine on January 1 after Kiev insisted it would no longer deal with Moscow or allow Russian energy flow, despite months of negotiations between energy giant Gazprom and Ukraine’s Naftogaz and the Gas Transmission System Operator.
“This is going to further tighten the LNG market,” Scott Darling, a managing director at Haitong International Securities, told Bloomberg. “Supply, particularly for LNG, is tight, and we see more upside risk to spot LNG prices this year and next.”
While the stoppage was expected after months of political wrangling, European consumers still have to replace around 5% of their gas and may rely more heavily on storage, the news outlet noted, adding that the gas repository had recently fallen below average levels for the current time of year.
In anticipation of the reduction of supply, prices for natural gas surged with Europe’s gas benchmark ending the year up more than 50%, Bloomberg reported, emphasizing that the growth hadn’t yet been reflected in the cost of the normally more-expensive LNG.
Ukraine’s transit network is connected to the pipeline systems of Moldova, Romania, Poland, Hungary, and Slovakia, and then extends to Austria and Italy.
Slovakia is seen as one of the countries hardest-hit by the latest halt, as the nation covers nearly 60% of its demand with Russian supplies running through Ukraine. Moldova could also be significantly impacted by the drastic move, as the former Soviet republic generates much of its electricity at a power station fueled by Russian gas.
Russia is still able to provide European consumers with gas supplies through the TurkStream pipeline, as well as to send shipments by the sea in the form of LNG.
TurkStream runs from Russia to Türkiye via the Black Sea, and then continues to the border with EU member state Greece. It has two lines, one for the Turkish domestic market and the other for central European customers including Hungary and Serbia.
