Naftogaz outlines Ukraine's risks after ending Russian gas transit
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NJSC Naftogaz will not extend the agreement on the transit of Russian gas and is currently searching for alternative solutions to support the operation of the Ukrainian gas transportation system, said Oleksiy Chernyshov, Chairman of the Board of NJSC Naftogaz, in an interview with Liga.net on July 17.
"Naftogaz will not extend the transit agreement with Gazprom; we are not negotiating and do not plan to negotiate," Chernyshov said.
He noted that only 4% of the total gas demand of European countries currently transits through Ukraine. Chernyshov believes that the gas transportation system is one of Ukraine's key assets, as it can provide a significant amount of gas transportation. Additionally, Ukraine has gas storage facilities and potential access to markets.
"We have no right to stop this system because if we do, the European market will reorient to other suppliers in a few years," Chernyshov added.
"We are looking for alternative solutions. For example, we have been approached by businesses from Azerbaijan, particularly Socar. But we don't have a ready-made solution yet. It is too early to talk about it."
Earlier reports stated that the transit agreement for Russian gas to Europe was signed by Ukraine and Gazprom at the end of 2019. It is valid until Dec. 31, 2024, based on the "pump or pay" formula. Gazprom is obliged to pay for pumping at least 40 billion cubic meters through Ukraine's gas transportation system in 2021-2024, regardless of the actual volumes of gas delivered.
European Commissioner for Energy Kadri Simson announced on Dec. 20 that the transit of Russian gas through Ukraine would be stopped, and EU member states that still consume gas from Russia should prepare for changes in the market and begin to reduce consumption.
In 2023, the transit of Russian natural gas through Ukraine's gas transportation system (GTS) decreased by 28.4% (by 5 billion 812.6 million cubic meters) compared to 2022, to 14 billion 646.6 million cubic meters, according to data from the Ukrainian GTS Operator.
According to a report by the Center on Global Energy Policy, even if some supplies continue beyond 2024, it is unlikely that the current transit agreement will be extended on similar terms due to a lack of political support.
In January 2024, it was reported that Gazprom had already incurred a trillion rubles ($11 billion) in net losses.
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