Russian Yamal-Europe pipeline blocked upside down: Explanation

MOSCOW, December 27 (Reuters) – The Yamal-Europe pipeline, which normally transports Russian gas to Europe, backed off last week, sparking a row between Moscow and its western neighbors.

Instead of flowing into European markets, which are facing a winter heating crisis due to sky-high prices, gas has headed east into Poland and Ukraine, a development that Russia attributes to the speculation by German companies.

The following is an explanation of how the pipeline works.

VITAL STATISTICS

The Yamal-Europe pipeline is over 2,000 kilometers (1,243 miles) long and carries gas from the gas-rich region of Yamal to the Russian Arctic.

It passes through the city of Smolensk in western Russia, passes through Minsk in Belarus, then through Poland before ending at the compressor station in Mallnow, near Frankfort on the Oder, near the German border. -Polish.

Construction of the pipeline began in 1994 and in 2006 reached an expected annual capacity of nearly 33 billion cubic meters, or about one-sixth of Russian gas exports to Europe.

Who owns it?

The portion of the pipeline in Poland is owned by EuRoPol Gaz, a joint venture between the Russian energy giant Gazprom and the Polish PGNiG.

The German section of the pipeline is owned by WINGAS, a joint venture between Gazprom and the oil and gas company Wintershall DEA. Wintershall, in turn, is co-owned by German chemicals group BASF and Russian LetterOne.

POLISH CONTRACT

A long-term gas transit contract between Russia and Poland expired in mid-May 2020. Since then, Gazprom has reserved short-term transit capacity through the pipeline through auctions.

It has not reserved capacity for daily stocks since December 19, when the pipeline was operating in reverse mode.

In the recent reversal, companies with supply agreements said their contracts had been honored.

BACKWARDS

The pipeline sometimes tilts in reverse, when gas flows from Germany to Poland, which also happened in October.

This reverse mode means that there are no gas demands to Germany, which also receives Russian gas via the Nord Stream 1 gas pipeline on the bottom of the Baltic Sea.

SHIPPING COSTS

Russian oil and gas giant Gazprom ships gas to Germany at lower prices than Poland to offset the higher transit costs involved in transporting by pipeline over a longer distance.

However, this complicates gas sales as the European Union has authorized re-exports of gas that were previously banned by Gazprom. Gazprom agreed to drop the re-export clause in 2017 as part of an anti-monopoly investigation into its practices in Europe.

This effectively allows gas bought at a discount from Russia in Germany to be sold to buyers in other countries at a profit.

In the past, Moscow has repeatedly accused Ukraine of conserving gas for Europe instead of letting it circulate, interrupting Russian exports, especially in the winter of 2008-2009.

Ukraine has denied any wrongdoing.

Russian President Vladimir Putin said last week that Germany was reselling Russian gas to Poland and Ukraine rather than relieving an overheated market for fuel.

The German Economy Ministry declined to comment.

(Report by Vladimir Soldatkin, edited by Alexander Smith)

(c) Copyright Thomson Reuters 2021.

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