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Nord Stream 2 will obviate need for Ukraine route

New transit deal before end-2019 unlikely

Ukraine wants EU to stop NS2 until transit secured

Brussels — Ukraine is preparing for zero Russian gas transit flows in 2020 once Russia's 55 Bcm/year Nord Stream 2 gas link to Germany comes online, but European gas supply security will not be disrupted, a senior Naftogaz executive said Tuesday.

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This is because Russia could cover peaks in winter demand with gas stored in European facilities, for example, rather than by flowing small volumes via Ukraine, Naftogaz's executive director dealing with disputes with Russia's Gazprom, Yuriy Vitrenko, told an event in Brussels.

"When Nord Stream 2 is finished, there will be no need for Russia to use the Ukrainian route," he said.

Russia plans to bring Nord Stream 2 online by the end of the year, when its current transit contract with Ukraine expires.

In this event "there will be no Russian gas transit through Ukraine in 2020," Vitrenko said.

Russia flowed 87 Bcm/year through Ukraine to Europe in 2018, and has said it would likely flow 10-15 Bcm/year after Nord Stream 2 comes online.

The European Commission is keen to keep the Ukrainian transit route viable, as part of wider EU efforts to support Ukraine as it moves to integrate into the European energy market.

It has brokered meetings between Russia and Ukraine to discuss a new transit contract for after 2019, but Vitrenko doubted any such deal would be signed by the end of this year.

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This is mainly because of the continuing arbitration dispute between Russia's state-owned Gazprom and Ukraine's state-owned Naftogaz over the current contract.

Naftogaz expects hearings on this to start in February and a final ruling in summer 2020, Vitrenko said.

Meanwhile he "sees no grounds" to expect a reasonable new transit deal with Russia.

"All Russia wants to discuss is extending the current transit contract -- which is not in line with EU rules -- and with no fixed volumes," said Vitrenko.

The only leverage to change this attitude would be for the EU "to say no to Nord Stream 2 unless Ukrainian transit is secured," he said.

The EU has no legal means to block Nord Stream 2 from being built, as long as the project developer follows all EU rules.

-- Siobhan Hall, siobhan.hall@spglobal.com

-- Edited by Jonathan Loades-Carter, newsdesk@spglobal.com