Bottlenecks may constrain Russian gas sales to Europe

Russia looks set to deliver 200 bcm of gas this year through pipelines to Europe, satisfying close to 40% of the region’s gas demand, according to Wood Mackenzie.

But Europe’s import requirements continue to grow – the analyst estimates a further 77 bcm/yr will be needed by 2025 – Russia’s export capacity may not be able to keep pace.

The main limitation is infrastructure bottlenecks in Europe which could force European consumers to turn to LNG instead.

Wood Mackenzie believes Europe’s LNG demands will more than double by 2025, claimed Hadrien Collineau, senior research analyst, gas and LNG.

“On the face of it, Russia is well positioned to further increase flows to Europe, given it has existing pipeline export capacity of 257 bcm per annum,” he said. “And it has started construction of two major pipelines: Nord Stream 2 and TurkStream.

“On paper, these two links could see Russia’s pipeline export capacity to Europe reach 343 bcm per annum. But effectively, capacity to Europe will be much less, perhaps even as low as 235 bcm per annum.”

The difficulties start at the Austrian hub at Baumgarten, where both Nord Stream 2 and TurkStream are designed to converge. This will limit capacity at the hub to deliver additional gas through Ukraine, even if Russia chose to do this, and the constraints will impact all the export routes Russia uses to access European markets, Mr Collineau added.

“Russia currently has 257 bcm per annum of export capacity to Europe. 128 bcm per annum of that is Ukraine transit capacity.

“Nord Stream 2 and TurkStream add 87 bcm per annum of capacity but these links will make use of existing European infrastructure, which then limits the volume of gas which can transit Ukraine to 20 bcm per annum. Consequently, overall Russian export capacity to Europe will only increase to 235 bcm per annum.”

He suggested another new pipeline in Germany would be a better option for linking Nord Stream 2 to north-west Europe, instead of directing the majority to Slovakia, enabling more flows through Ukraine.

Or Russia could commission additional pipeline strings on the Nord Stream or TurkStream routes to expand access to Europe.

Source: Offshore Magazine