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Highlights

Nord Stream 2, TurkStream links to start by year-end

Power of Siberia to China also set to begin flows

Ukraine transit debate set to rumble on in 2019

London — Russia's Gazprom may well fall short in 2019 of matching its record natural gas exports -- set to almost reach 200 Bcm in 2018 -- as Europe looks likely to mop up additional LNG supplies expected to hit the market next year.

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That won't be a concern for Gazprom, though: it has a lot on its plate in 2019 and will be front and center of market developments in Europe and in China as it prepares to flow first gas by end-2019 through three new pipelines.

And with the global LNG market expected to tighten again in the early 2020s, Russian gas will likely surge again to meet the European demand in the next decade.

Gazprom has not spared any expense in developing the three giant projects -- the controversial 55 Bcm/year Nord Stream 2 pipeline, the 31.5 Bcm/year TurkStream link and the 38 Bcm/year Power of Siberia line to China.

The Russian company's other main job in 2019 will be working out with arch-foe Ukraine the terms for the continued transit of Russian gas to Europe via Ukraine once their 10-year accord expires at the end of 2019.

Even if Nord Stream 2 and TurkStream start up on time -- and there are some doubts about that, especially the former -- Gazprom will still need to transit some gas via Ukraine.

There are several reasons.

One is that on peak demand days, there will simply not be enough capacity without the Ukraine route.

Nord Stream 1 and 2 (300 million cu m/d), the route via Belarus (90 million cu m/d), TurkStream (85 million cu m/d) and Blue Stream (45 million cu m/d) only give Gazprom a total of 520 million cu m/d.

Half of TurkStream's capacity is designed for the Turkish market, while the other half is meant to link in with existing or new pipeline infrastructure in southeast Europe.

At the peak of the Beast from the East cold spell that covered much of Europe in March 2018, Gazprom delivered 710.2 million cu m to Europe and Turkey.

It is estimated that around 100 million cu m of that volume was supplied from Gazprom-owned storage in Europe, which left 600 million cu m/d delivered in the physical pipeline flow, some 80 million cu m/d below the total capacity without Ukraine.

Gazprom Export has said it sees the Ukraine route as becoming a back-up line for when the demand in Europe is the highest.

However, at the moment, there are certain parts of Europe that it would be almost impossible to reach other than via Ukraine.

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Moldova, Romania and Bulgaria, for example, would struggle to get re-routed Russian gas until TurkStream is commissioned and new capacity added in Bulgaria.

Simply put, then, Ukraine remains a key factor in European gas, and it wants to retain its transit function for as long as possible.

Relations between Moscow and Kiev are far from harmonious -- the latest scuffle in the Kerch Strait escalated tensions already heightened since the annexation of Crimea in 2014.

Gazprom has been reluctant to engage in talks with Ukraine brokered by the European Commission, with no negotiations expected until early 2019.

Gazprom and Naftogaz remain embroiled in their arbitration dispute too. The Russian company has been less than enthusiastic about reaching an out-of-court settlement on the issue, sending counterclaims and appeals back to the arbitration court in Stockholm having lost a net $2.6 billion to Naftogaz.

But it seems highly improbable that transit of Russian gas via Ukraine will cease on December 31, 2019 -- too much depends on it.

CHINA EXPORTS

While its European pipeline plans remain politically divisive, things seem a lot more straightforward further east where Gazprom plans to complete in 2019 the 38 Bcm/year capacity Power of Siberia gas pipeline.

It has been a long road to first gas, but the date is now set for December 2019 for first gas to flow.

The 2,200 km line will initially be filled with gas from the giant Chayandinskoye field before gas from the Kovykta field is then added to the supply.

Gazprom expects to begin gas exports to China at a level of around 5 Bcm/year in the first year of operations through the Power of Siberia. In the second year of operations -- 2021 -- supplies are expected to ramp up to 10 Bcm before then ramping up to capacity in 2022-23.

Russia also has plans to send another 30 Bcm/year via a western route to China in the future, with talks expected to resume at the highest level in the near future. It also envisages another eastern route.

Moscow and Beijing are eyeing ever closer relations in the energy sphere, particularly given that they have a common economic foe in the guise of the US government.

Russia is under US sanctions due to its role in the Ukraine conflict while the US and China continue to wage their trade war.

--Stuart Elliott, stuart.elliott@spglobal.com

--Edited by James Leech, newsdesk@spglobal.com