Industry Trend Analysis - Gazprom's Strengthens Southern Encroachment - SEPT 2017

BMI View: Gazprom's supply agreement with Hungary boosts Russia's efforts to move gas into Europe via a southern route. If successful, Gazprom could divert around 12bcm of gas currently transited through Ukraine, increasing the political implication s of a Nord Stream II expansion, which could be more damaging to Ukraine.

Despite efforts by the US to encourage LNG exports into Central and Eastern Europe, Hungary has signed an agreement with Gazprom to receive pipeline gas via Serbia. The deal will see the delivery of around 8bn cubic metres (bcm) of natural gas via the Turkstream pipeline, the pipe lay for which began in late June, then via Bulgaria and Serbia into Hungary. Both Bulgaria and Serbia have already signed agreements with Gazprom and are expecting delivery via the southern route from 2019.

Hungarian foreign minister Peter Szijjarto claimed that the route is favoured by the country because it is more advanced in planning than options through Romania and Croatia. The European Union has been slow to progress pipeline and LNG projects. The final investment decision on the Krk LNG project, which could ship gas into Hungary via Croatia, was delayed by a year in May, further raising the uncertainty of the project happening. The proposed Eastring pipeline, that would bring southern corridor gas through Bulgaria and Romania into Hungary, remains at the study phase. The route via Bulgaria and Serbia has largely been set for a number of years through the former South Stream route.

Russian Tentacles Probing Deeper
Major Russian Pipelines Into Europe
** Strings 3 & 4 would add another 55bcm. Source: Gazprom, BMI

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