MOSCOW, December 26. /TASS/. The cessation of transit of Russian gas via Ukraine starting in 2025 may dismantle the Ukrainian gas transport system due to its significant wear and the loss of transit revenue, experts surveyed by TASS said. The gas transport system will require additional maintenance costs, no longer being an integrated facility.
Back in 2012, Gazprom chairman Alexey Miller commented on the role of the Ukrainian gas transport system, stating that "if, as some say in Ukraine, the gas transport system is a historical treasure, it seems its place should be in a museum." Since then the issue of its technical state has been repeatedly raised, while Russian President Vladimir Putin said in 2021 that Ukraine’s gas transport system is over 80% worn.
"Wear is evident. The largest portion of infrastructure was built 40 and more years ago. Since then it has not undergone any capital reconstruction, which means it is outdated. On the other hand, the volumes of commodity transport work have decreased significantly from its design capacity both on Ukraine’s domestic market and on transit. This is why the system functions intermittently," Deputy Head of the National Energy Security Fund Alexey Grivach said, adding that the cessation of transit is likely to reduce the effective volume of transportation through the gas transport system two-fold and destroy the system.
The modernization of the main facilities of the Ukrainian gas transport system has been persistently underfunded since the beginning of the 1990s, Alexey Belogoryev, research director of the Institute for Energy and Finance Foundation, noted. For Ukraine, the complete cessation of the transit of Russian gas means not only the loss of the crucial transit revenues (around $1.3 billion per year under the expiring contract), but also the increase in unit costs for transportation of gas to domestic and foreign consumers, as well as the necessity to optimize the unused gas transport capacities to reduce total expenditures on maintenance of the gas transport system, he explained. More gas will also be consumed due to production and operating needs of underground gas storage facilities over the pressure decline at points of their connection with the gas transport system.
Moreover, Ukraine will have to reorganize the flows of gas on the domestic market (from the west to the east) and resolve respective issues with keeping pressure in the eastern and central parts of the gas transport system, experts added. The intrasystem swap between Ukraine’s east, where gas is produced and mainly consumed, and the west, where the main storage facilities are placed, is unlikely to work, while the gas transport system will cease to exist as an integrated facility, Grivach said.
"This all does not mean that the Ukrainian gas transport system will not function normally from the viewpoint of gas supply to the domestic market, though economically it will become a burden," Belogoryev concluded.
What will physically happen to the gas transport system?
The loss of payments for transit and the need for extra costs on maintenance of the system will lead to a decrease in the cost of the facility and its strategic importance, Grivach suggests. He even admitted that part of the system may be taken apart and sold for scrap and parts.
"If it becomes obvious that transit will not resume, economically a large-scale optimization of capacities will be required to cut constant costs on maintenance of gas pipelines and compressor stations. Whether it will be held in due time and in what form depends more on political decisions by Ukraine’s leadership," Belogoryev said.
Meanwhile, without transit flow, it will only be possible to assess the largest part of the Ukrainian gas transport system "by the scrap value," he added.
Prospects of Ukraine-Poland gas hub
On December 19, Ukraine announced the intention to create together with Poland the Eastern-European gas hub to ensure supplies to Western and Eastern European countries amid terminated transit of Russian gas. However, experts interviewed by TASS are skeptical on this idea.
"At the moment we see no justification in the creation of the Eastern-European gas hub. This idea could have probably appeared due to quite large gas storage facilities in Ukraine, though such an idea has no logical basis. It is also not clear who would be interested in the supply of large volumes of gas to such a hub," Finam analyst Sergey Kaufman said.
For the creation of a real hub, large flows of gas should meet in one place to be later redirected to major places of consumption, Belogoryev noted. Without transit flow, Ukrainian gas storage facilities are not really interesting for the European Union, considering the fact that there are huge storage capacities in Austria, Hungary, and Slovakia, he said, adding that Poland’s possibilities to receive and regasify LNG also cannot be compared with those in Europe’s northwest, Italy, and even Turkey.
That said, Grivach believes that Ukrainian gas storage facilities in the Lvov region may be of serious interest for western neighbors, adding that the latter would probably "try to gain control over them one way or another."
InfoTEK expert, Deputy General Director of the Institute of National Energy Alexander Frolov admits that if transit is terminated the infrastructure of the Ukrainian gas transport system may become "a potential military target."
On gas transit via Ukraine
The agreement on transit of Russian gas through Ukrainian territory, which stipulates the pumping of 40 billion cubic meters per year, expires at the end of 2024. Russian President Vladimir Putin said at his combined annual press conference and Q&A session on December 19 that there would definitely be no new contract for Russian gas transit via Ukraine, but Moscow and Gazprom would manage without it. Prime Minister of Ukraine Denis Shmygal said earlier that Kiev would terminate Russian gas transit at 07:00 a.m. local time (05:00 a.m. GMT) on January 1, 2025, adding that the restart of transit via the Ukrainian gas transportation system is possible at a request of the European Commission unless this is Russian gas.