Russia, Ukraine and the European gas system - eca.europa.eu · Ukraine: major import diversification in 2014 as Gazprom not competitive, reversal in 2015? Evolution of Ukraine’s

© OECD/IEA 2015 © OECD/IEA 2015

Russia, Ukraine and the European gas system International Energy Agency

Laszlo Varro Head of Gas, Coal and Power Markets

© OECD/IEA 2015

WEO NPS 2035 without increasing gas imports to the EU: 120000 windmills to compensate for

declining coal generation

PV on 52 million rooftops to compensate for decommissioned reactors

5 times the current EU biogas production to compensate for declining gas upstream

Reducing dependency on Russian gas: running faster to stand still

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It is the building sector

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Renewable electricity – does it replace coal or gas?

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10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

90 000

100 000

Prod

uctio

n, M

W

Hours

Coal surplus capacity Coal

RES NG based CHP production

Nuclear Load

Renewables and coal in Germany at different load levels

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Shale gas in Europe – the social licence to operate

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North African supplies – is a rapid ramp up likely?

The Algerian army deployed at the In Amenas gas field during hostage taking by extremists, 2013

The El Arish gas pipeline after a militant attack, Egypt 2013

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In need of a hero Even if it goes to

Asia, it helps Europe

It will have destination, but not volume flexibility

It might drive out non-Russian sources rather than Gazprom

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Bottlenecks limit the ability of LNG to replace Russian gas

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Ukraine gas transit is decreasing but still vital – Nord Stream only alternative with excess capacity

36

31 6

17

14 18

34

29

Azerbaijan 6

Iran 9

26 33

36 19 4

Major physical flows in 2014 in bcm

LNG 5

LNG 1 LNG 8

3

Russian gas exports to Europe & share of Ukrainian transit

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10

20

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40

50

60

70

0

20

40

60

80

100

120

140

160

180

2010 2011 2012 2013 2014

Direct exports toFinland, Latvia,Estonia

via Ukraine

via NordStream

via Belarus

via Blue stream

Share of Ukrainiantransit

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1

2

3

4

5

6

7

8

EU

R/M

Wh

next winter - next summer next winter - MA

Futures markets price business as usual in Ukraine

Implied value of filling gas storage for the next season

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2013 and 2014: decreasing gas consumption in Ukraine, yet larger potential

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5

10

15

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25

Industry District heating Technical gas andlosses

Households Public organisations(hospitals, schools,

administrations)

bcm

2013

2014

Evolution of Ukraine’s gas consumption by sector, 2013-2014

© OECD/IEA 2015

Ukraine: major import diversification in 2014 as Gazprom not competitive, reversal in 2015?

Evolution of Ukraine’s imports by source (prices and volumes, 2014-2015) and comparison with German border price

With the prolongation of the winter interim agreement and the lower contractual oil-linked gas price, Gazprom’s supplies are now competitive again, so that Ukraine can tap

both Russian and reverse flow gas to fill up its storages

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0,5

1

1,5

2

2,5

3

3,5

4

4,5

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100

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300

400

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600bcm USD/kcm

Imports fromGazprom

Reverseimports fromEU

Sale priceGazprom

Averageimport costEU reverse

AverageGermanborder price

Source: Naftogaz, Ukrtransgaz, Gazprom, IMF