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Russia says to fulfil contractual gas supply obligations amid Belarus threat

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Russia says to fulfil contractual gas supply obligations amid Belarus threat

Highlights

Lukashenko hints at gas transit block amid EU standoff

Kremlin says Belarus move 'not coordinated' with Russia

Gazprom chief says European injection program ongoing

Russia will continue to meet its contractual gas supply obligations with its European customers, the Kremlin said Nov. 12, after Belarusian President Alexander Lukashenko hinted Nov. 11 that Minsk could consider blocking the transit of Russian gas to Europe.

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Cited by the Prime news agency, Kremlin spokesperson Dmitry Peksov also said the Belarus stance was not discussed ahead of time with Moscow.

"This was not coordinated in any way. [Belarus] is our ally but it is a sovereign state," Peskov said.

"This is a statement by the president of Belarus. I'd like to remind you of President [Vladimir] Putin's statement that Russia has always fulfilled its obligations under contracts," he said.

"Russia was, is, and will be a country that fulfills all obligations to provide European consumers with gas and to fulfil contractual obligations," he said in response to questions over the implications for Russia of Lukashenko's comments.

Lukashenko, speaking at a meeting of Belarus' council of ministers on Nov. 11, said Minsk was ready to take "retaliatory" measures against the EU amid the standoff over the presence of thousands of migrants on the Belarus-Poland border.

"We provide heat to Europe, and they are threatening us with the border closure. What if we block natural gas transit?" Lukashenko was quoted as saying by the state Belta news agency.

"If [Europe] imposes additional sanctions that are indigestible and unacceptable for us, we will hit back," he said.

The EU is preparing new measures against Belarus amid accusations that Minsk is shuttling the migrants to the Polish border in an attempt to hit back at the EU for previously imposed sanctions.

2021 volumes

Belarus transits Russian gas via the Yamal-Europe pipeline into Poland and on to Germany, and is a key route for Russian deliveries to Europe.

Flows into Poland from Belarus have averaged 76 million cu m/d so far in 2021, according to data from S&P Global Platts Analytics, though deliveries began to be curtailed in August and have remained volatile ever since.

The veiled threat from Lukashenko comes as European gas prices remain at sustained highs, due in part to lower-than-expected imports from Russia and low storage stocks.

According to Platts price assessments, the TTF day-ahead contract hit an all-time high on Oct. 5 of Eur116.10/MWh and has remained volatile through the remainder of October and into November.

The TTF day-ahead price was assessed at Eur72.73/MWh on Nov. 11, up by 420% compared with the same assessment a year ago.

Gazprom injections

Prices had fallen earlier in the week after Gazprom said Nov. 9 it would implement a plan to inject gas into five of its European gas storage sites.

In a new statement Nov. 12, Gazprom CEO Alexei Miller said the company was "currently implementing" the plan. "Various routes of gas transportation are used including through the territory of Ukraine," Miller said.

"Our obligations under the transit agreement with Ukraine will be exceeded this year. No sooner said than done," he said.

Gazprom in late 2019 agreed to transit 65 Bcm of gas via Ukraine in 2020 and 40 Bcm/year in the 2021-2024 period, well down on a recent transit peak of 94 Bcm in 2017. The contract is due to expire at the end of 2024.

Gazprom can also book extra Ukrainian transit capacity on a shorter-term basis for supplying its European buyers.

The Russian giant has access to working gas capacities at four storage sites in Germany -- Rehden, Katharina, Jemgum, and Etzel -- as well as at Haidach in Austria, Bergermeer in the Netherlands, Banatski Dvor in Serbia, and Damborice in the Czech Republic.

S&P Global Platts Analytics believes a restocking by Gazprom would likely bring some relief to European gas markets, but would not be enough to boost stocks back to last year's levels.

"Any refilling through November will help reassure the market ahead of the peak demand season, but is unlikely to significantly reduce the year-on-year deficit that has accumulated over 2021," it said Nov. 9.

The current 75% level of stocks compares with 94% at the same time last year.

Platts Analytics also believes Russian gas flows into northwest Europe will rise through November.

"We currently forecast 125 million cu m/d on average to go to northwest Europe in November, but so far these flows have averaged just 111 million cu m/d," it said.

However, it said, even at 125 million cu m/d, Russian flows would still be almost 80 million cu m/d below the five-year average.