Ukraine faces gas transit fee loss by 2015

Russia's Nord Stream and South Stream pipelines could deprive Ukraine of the equivalent of two-thirds its gas transit volumes when they start up, threatening the country with significant losses in revenues. Russia supplies Europe with one quarter of its gas needs and 80 per cent of that gas is delivered via Ukraine. The remaining volumes travel through another western neighbour, Belarus. Russia has assured Ukraine that Nord Stream, its first gas pipeline to Europe that skirts ex-Soviet transit countries, will not affect its transit volumes. These totalled 95.4 billion cubic metres (bcm) in 2010, providing the state gas company, Naftogaz, with $1.3 billion (Dh4.7 billion) in net gas transit profit. But statements made last week in Europe show that both Nord Stream, slated for launch later this year, and the $21.5-billion South Stream pipeline that aims to transport up to 63 bcm under the Black Sea to central and southern Europe, could take away a large chunk of Ukraine's gas transit flows. Rocky relations Russia has a history of rocky energy relations with both its western neighbours, with a pricing dispute in January 2009 cutting off transit supplies across Ukraine to Europe for nearly three weeks. The subsea pipeline projects amount to an attempt to diversify Russia's export routes and reduce Moscow's reliance on good relations with Ukraine and Belarus. The CEO of Russian pipeline gas export monopoly Gazprom said on Wednesday in Brussels that the Russian gas export monopoly plans to redirect 20 bcm of gas transported through Ukraine to Nord Stream, which runs under the Baltic Sea to Germany. Meanwhile a South Stream presentation showed that the pipeline will be two-thirds filled by gas to meet existing Russian supply commitments, implying that this volume will be cut from either Belarus, or Ukraine, or both. "With just Nord Stream alone, Ukraine could be left with 50-55 bcm to transit by 2015. But if South Stream is brought into the picture, it will be whittled down to nothing. Ukraine and Belarus will be fighting for the small volume there is left," said Mikhail Korchemkin of East European Gas Analysis. South Stream denies it will entirely replace flows via Ukraine.