Gazprom Announces Yamal-Europe 2 Plans, Pressures Ukraine Over Gas Transport System

By Benjamin Priddy, April 9, 2013

WEB EXCLUSIVE, Moscow. Gazprom announced plans on April 5 to undertake a joint six-month feasibility study with Poland's EuRoPol GAZ on the Yamal-Europe 2 gas pipeline project. The project foresees supplying at least 15 billion cubic meters (bcm) of Russian gas to customers in Poland, Slovakia, and Hungary. Yet, analysts doubt the necessity of adding more Russian pipeline capacity to Europe and top Polish government officials have publicly opposed the idea of taking more Gazprom gas. The announcement comes ahead of talks this week with Ukraine's Naftogaz and is likely aimed at strengthening Gazprom's position in negotiations over a deal to takeover Ukraine's gas transport system, according to several Russian news sources.

At its current capacity, the Yamal-Europe pipeline transits 32.9 billion cubic meters (bcm) of gas per year from Russia to Belarus, Poland, and Germany. "The Yamal-Europe 2 project provides for the construction of additional gas transportation capacity to ensure a reliable, guaranteed supply of Russian gas to European customers," Miller said, according to an April 5 Gazprom press release.

The pipeline would provide Poland access to transit fees and increased energy security through diversification of supply, Miller explained. However, Polish government officials are hesitant to sign off on the project.  "When they present concrete details of the project to us, then we will consider them," Polish Deputy Prime Minister Janusz Piechocinski said. "Poland is ready to cooperate within the framework of European law and all bilateral and multilateral agreements that have already been signed," Piechocinski explained.

However, Poland's own gas ambitions stand in the way of the new Gazprom project. "Poland has been proactively working on the diversification of its gas supplies and sources over the last several years," Polish Prime Minister Donald Tusk said, according to Russian news website Prime. "That is why we are not interested in a radical increase in the amount of gas bought from Gazprom," Tusk explained.

Poland plans to build a liquefied natural gas (LNG) terminal by 2014 and the Polish government is also currently working on a proposal to facilitate permit procedures for international companies interested in shale gas exploration and production there (see the March 2013 issue of OGE for more details). According to Grazyna Piotrowska-Oliwa, chief executive of Polish gas company PGNiG, who also owns a 48 percent share of EvRoPol GAZ, the Gazprom-EvRoPol GAZ agreement doesn't mean the Yamal-Europe 2 pipeline will be built. "This is just a document regarding a feasibility study and does not mean that the gas link will be built," Piotrowska-Oliwa told Reuters.

Still, during a meeting with President Vladimir Putin April 3, Gazprom CEO Aleksey Miller said that the Yamal-Europe pipeline is currently the most economical and effective transit route for Russian gas to Europe. In 2011, Gazprom acquired control over Belarus' gas transportation system and has a long-term lease on the Belarusian territory through which Yamal-Europe runs. Gazprom's control over the pipeline route eliminates Russian worries over potential supply disruptions stemming from political disputes with transit countries, a problem that still plagues