“No matter the agreement achieved between Russia and Ukraine on October 30, the gas supplies through Ukrainian territory might be interrupted, as Gazprom won’t be able to provide the quantities necessary to the European consumers this winter. In a situation like this one the Russian gas company usually uses what has been stored in the underground gas storages in Ukraine. The moment was missed, when the storage could have been filled in, in order to cover the needs of all the states for the winter”, said for RB Russian analyst and consultant in the area of oil and gas industry Mikhail Krutikhin during his visit to Sofia. He took part here in a discussion on the situation in Russia’s gas and oil sector and the effects on Europe and Bulgaria.

According to Krutikhin Ukraine has received no supplies from Russia since March this year for the filling of storages and the gas currently available will be used for its own needs. That is why an interruption of supplies could well be expected, especially if the winter is cold. The Bulgarian institutions should be ready for such an unpleasant surprise.

There are several ways to ease the situation with gas deliveries to Bulgaria. First – different sources should be used. The interconnector with Turkey should be built up in the long term, as Bulgaria has a contract with Azerbaijan for the supply of 0.5 billion cubic meters per year, which can come along the pipes after the Turkish segment is completed.

At the EU level an agreement should be reached for a better coordination and quantities to be transferred from one state to another in case of a crisis. This is hard for the moment, as the European coordination is at a very low level.

“Third, in the short term, additional quantities can be bought from Gazprom. Separate companies might sign contracts, outside intergovernmental treaties or ones, signed with the local partner. Gazprom offers lower market prices under such contracts,” Krutikhin commented.

Is there any sense in the South Stream project and more particularly for Bulgaria, as it is not clear what the prices will be and to what extent the supplies would be guaranteed? According to Mikhail Krutikhin the economic profit from the project is not clear, besides the infrastructural one.

“It was a political project to start with, not a commercial one. Its main task, along with North Stream is to circumvent Ukraine and to deprive it from gas transit incomes, with the claim that the crossing of its territory is not safe. However, we see that Ukraine does comply with transit agreements, so this argument is a façade rather. It serves the task of punishing the Ukraine for selecting the European direction for its development.”

The overall value of South Stream exceeds USD 70 billion, as only the Russian part, currently being constructed, is assessed to USD 37 – 47 illion. The European segment and the underwater one are quite cheaper.

“If Gazprom builds South Stream at its own expense across the territories of the European countries it might benefit, as it will have a really convenient infrastructure and, as written down in the rules of the Third Energy Package of the EU, this infrastructure will serve for gas transfers of other suppliers too – from the Caspian region, from Iran and Kyrgyzstan across Turkey and into Bulgaria. Thus these pipes might be used for quantities, depending on demand and supply,” Mikhail Krutikhin further says.

However, at this stage neither Gazprom agrees to let other suppliers to the pipeline, nor the EU will cancel the Third Energy Package because of Gazprom, as it envisages a greater choice for selection to consumers, investments and safety of supplies. There are no political goals hidden behind the Third Energy Package. Its rules were set quite a long time ago and those aim at preserving competitiveness in view of gas supplies and restricting monopoly. The market’s common sense behind the Third Energy Package says monopolists cannot increase prices or dictate the conditions unilaterally. Considering this context, the political game comes only from the Russian side and not on the part of the EU. At the same time the energy expert maintains that it will be getting harder and harder to use natural gas as a political weapon.

English version: Zhivko Stanchev