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Russian Gas Flow To Europe Drops As Poland Transit Deal Expires

The flow of natural gas from Russia to Europe via the Yamal-Europe pipeline crossing Poland completely stopped on Tuesday after a two-and-a-half-decade-old transit deal between Russia and Poland expired and after the COVID-19 pandemic battered gas demand in Europe.

The Russia-Poland transit deal for natural gas from the Yamal peninsula to Germany, via Belarus and Poland, expired on May 17. Poland has aligned its legislation with the energy regulations of the European Union (EU) and Polish operator Gaz-System began offering capacity bookings on the Polish section of the Yamal-Europe pipeline in accordance with EU regulations.

Poland has been trying to wean itself off Russian energy supplies and has become one of the first eastern European countries to have booked U.S. liquefied natural gas (LNG) cargoes.

With the end of the gas transit agreement with Russia, Poland is moving to a more liberalized natural gas market, but it expects that Russia will continue to send similar volumes of gas before the transit deal expired, a Polish official told Reuters last week.

For July 1 through October 1, Poland’s Gaz-System has already sold 80 percent of the capacity on the pipeline made available as a result of termination of the transit contract, the company said on May 15. The remaining available capacity will be auctioned in June, July, and August at monthly auctions for monthly volumes.

But the capacity bookings for the first days following the expiration of the gas transit showed little appetite for gas in Europe, according to analysts.

Gaz-System told Reuters that the capacity booked for Sunday was much lower than for the previous days. So, “there is no need for the pumping stations to work for 24 hours a day at such low orders for the transit service,” the company said.

Commenting on the drastic decline in gas flows from Russia via Poland, VTB Capital said in a note, as carried by Bloomberg:

“Such a significant reduction in gas transit is primarily driven by weak demand in Europe amid warm winter, high levels of gas in underground storage and demand distortion due to Covid-19.”

By Tsvetana Paraskova for Oilprice.com

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