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Ukraine transit post-2024?

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The last issue of my Gasmarkt was completed on the train travelling to Amsterdam. The Flame Conference, one of the major European gas conferences, took place from 23 to 25 April, just in time for the editorial deadline. Some insights from the conference will appear in a number of stories in this issue. This also applies to the topic of the month, the possible end of the Ukrainian transit in early 2025 and its consequences.

The Flame took place for the 30th time. Like the first event, it was held at the Okura Hotel. In the meantime, the conference had moved to the RAI Congress Centre for some years, but this was not a success story. I think the conference is a good reflection of the evolution of the European gas market. When I attended the conference for the first time in 1999 or 2000, it was an excursion into the big, wide world of gas, which had only a limited connection with the reality of the German market. The development of gas demand in Turkey, for example, was irrelevant from a German perspective, even though the projections were extremely impressive - demand then developed much more cautiously. A few years later, I had a much stronger feeling that Germany had arrived on the European gas market. The same topics were discussed in Amsterdam as in Berlin or Düsseldorf. LNG was always an exciting topic in Amsterdam. I still remember presentations where import terminals were sprouting up like mushrooms on all coasts of the USA. But as we all know, things turned out differently. The future strong growth of US LNG exports was also a topic at Flame 2024.

At some point over the years, no Flame speech could do without hydrogen. The core message of Flame 2024 was a new self-confidence for natural gas. Hans Coenen, member of the board of Gasunie, spoke of a bright future for gas. This applies not only to renewable gases, but also to natural gas. Flame participants were convinced that replacing natural gas is expensive and would take a long time.

Biomethane has played a surprisingly important role in Flame. In this issue, I make a strong case for bio-LNG as a fuel for heavy-duty vehicles. I may be completely wrong, but it is exciting to see whether biomethane has a chance of being used as a fuel for long-haul trucks. Most people I know say never. So please let me know what you think!

Topic of the month: Ukraine transit post-2024?

The future of Ukraine's gas transit is increasingly in the spotlight, and not just for gas traders. The transit contract between Gazprom Export and Naftogaz Ukraine ends at the end of December this year. If gas flows through Ukraine come to a standstill as a result, Europe will lack around 135 TWh of natural gas. As absurd as it may seem, gas flows through Ukraine to the Ukrainian-Slovak border point of Velke Kapuzany have remained stable since the start of the war in Ukraine (green area in Figure 1). Gazprom Export uses the volumes to fulfil longterm supply contracts mainly with customers in Austria, Slovakia and the Czech Republic. Volumes also continue to flow to Italy.

What is clear is that there will be no new medium or long-term agreement under mediation of the EU Commission as at the end of 2019. The EU Commission already ruled this out in February. No interconnection agreement, no transit? In the editorial of the February edition (ener|gate Gasmarkt 02/24), I wrote somewhat casually that it was all very simple and that a new transit agreement is not needed. The capacity could be booked on the Hungarian capacity platform RBP in accordance with the European rules on capacity allocation. You, dear readers, may remember that in 2020 Gazprom Export repeatedly booked – or did not book – monthly capacity on the platform for the Russian- Ukrainian entry point Sudzha. Traders and analysts watched the platform on the auction days, and the results caused gas trading prices to rise or fall. [...]