London — Russian gas supplies to Europe continued to recover in March after a significant slump at the turn of the year, with exports last month reaching 11.65 Bcm, an analysis of S&P Global Platts Analytics and ENTSOG data showed Thursday.
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Russian exports plunged in January as unseasonably warm weather, combined with a re-routing of gas away from Ukraine due to contractual changes, impacted flows.
Deliveries in March via the main corridors to Europe -- Nord Stream, the Yamal-Europe corridor, Ukraine and now TurkStream -- rose by 1 Bcm compared with February and averaged 375 million cu m/d.
But supplies remain well below Q4 last year when flows averaged 485 million cu m/d, with demand in general across Europe subdued by the mild winter weather and more recently some declines in consumption by industry due to the coronavirus.
This weak demand, combined with sky-high gas stocks across Europe in 2020, is partly responsible for the low Russian deliveries, while landmark changes to flows via Ukraine have altered the way gas reaches central, eastern and southeastern Europe.
Flows via Ukraine into Bulgaria, Greece, North Macedonia and Turkey have effectively ceased, with TurkStream now replacing those volumes.
And buyers changing their contractual arrangements with Russia's Gazprom around delivery points ahead of the expiry of the company's transit deal with Naftogaz meant a drop in flows via Velke Kapusany.
Flows via Ukraine continued to rise in March, however, with total volumes reaching 3.84 Bcm, up from 3.15 Bcm in February and just 2.03 Bcm in January.
Supplies on the Ukrainian route are still well down on the recent high of 7.24 Bcm in November, though.
At an average of 124 million cu m/d, they are also below the 178 million cu m/d ship-or-pay volume agreed between Gazprom and Ukraine's Naftogaz at the end of 2019.
Gazprom agreed to pay for a total of 65 Bcm of transit via Ukraine in 2020 on a "flat" basis -- meaning payments for an average of 178 million cu m/d -- under the terms of its five-year transit deal with Naftogaz.
It paid $175 million for transit in January and pre-paid $164 million for transit in the shorter month of February, Naftogaz chief commercial officer Yuriy Vitrenko wrote on his Facebook page on February 4.
Assuming a daily transit cost of $5.65 million, Gazprom is likely to have to pay $2.06 billion over the course of 2020 whether it transits the 178 million cu m/d or not.
Platts Analytics had expected Russian flows to Europe to remain below last year's levels through 2020.
However, Gazprom's short-run marginal costs have fallen with the sharp global oil price plunge as the company's exposure to taxation is reduced, making European deliveries more cost effective.
Gazprom's short-run marginal cost was previously estimated at around Eur7.30/MWh for 2020, but is estimated to be just Eur4.20/MWh for Q3.
"With the Summer-20 US LNG short-run marginal cost currently estimated at Eur8.50/MWh, Gazprom will now be better placed to challenge US LNG imports to Europe," it said.
"This should lead to relatively higher Russian sales this summer via Gazprom's Electronic Sales Platform (ESP)," it said.
Gazprom can make as much gas available as it likes on the ESP, a tool it uses to top up sales outside of its long-term contract sales model.
Flows via the Nord Stream pipeline to Germany, meanwhile, continued at a steady 156 million cu m/d in March, while flows through the Yamal-Europe corridor via Belarus into Poland remained low at an average of 76 million cu m/d.
Much less capacity was booked on the route on a quarterly/monthly basis meaning there was a need for more day-ahead bookings to increase flows.
Flows via the corridor could shift again from mid-May when Gazprom's transit contract with the owner of the Polish section of Yamal-Europe expires and capacity is booked according to EU rules.
Platts Analytics said, however, that considering strong Q2 bookings for entry at the Mallnow interconnection point and that Gazprom owns 48% of the pipeline, strong bookings on a month-ahead and day-ahead basis after May 17 are expected.
The start-up of the 31.5 Bcm/year capacity TurkStream pipeline has also triggered a major shake-up in how Russian gas reaches southeast Europe.
One of the strings is designed to bring Russian gas to the Turkish market directly -- for which no data is available -- while the other flows gas out of Turkey into Bulgaria.
Both replace supplies previously sent via Ukraine on the TransBalkan pipeline.
Data on Russian exports in 2020 will be lower as a result because deliveries to Turkey via TurkStream are not included, while supplies to Turkey via the Trans-Balkan line were in 2019.
According to data from ENTSOG, a total of 0.43 Bcm was sent from Turkey to Bulgaria in March via the Strandzha/Malkoclar interconnection point -- or an average of 14 million cu m/d.