EU gas firms urge action on Ukraine transit as deadline looms

Leading energy firms from Central Europe are rallying to secure the continued transit of natural gas through Ukraine into 2024, warning of potential supply disruptions and price surges.

Among the supporters are Slovakia’s SPP and its gas network operator Eustream AS, as well as Hungary’s MOL Hungarian Oil and Gas Plc and MVM Zrt., Caliber.Az reports via foreign media.

Major industrial players and trade associations from Hungary, Austria, Italy, and Slovakia have also joined the appeal.

“We will present the declaration to the President of the European Commission, Ursula von der Leyen, so that she has first-hand information about the threat to energy and economic security in our region,” said SPP Chairman and CEO Vojtech Ferencz.

Tensions over gas transit

The appeal puts the European Commission, the EU’s executive arm, at the center of efforts to mediate as the bloc seeks to phase out Russian fossil fuels. Yet, Central European nations, still reliant on Moscow’s gas, are feeling the pressure. Talks between Russia and Ukraine have dragged on for months, with no resolution in sight.

“The Commission has no interest in the continuation of Russian gas transit via Ukraine,” the EU executive stated via email. “The EU is prepared for the end of the transit and alternatives are in place.”

Ukraine, meanwhile, has said it will not sign contracts for gas originating in Russia but is open to negotiations if requested by the EU. Some proposals involve intermediaries transferring gas through Ukraine, raising concerns over whether Russian gas will still infiltrate the system.

Slovakia leads the push

Slovakia, the largest remaining buyer of Russian gas via Ukraine, is spearheading efforts to extend the deal. Deputy Prime Minister Denisa Sakova revealed that talks are underway to secure a deal by year’s end, covering the annual 15 billion cubic meters currently transiting through Ukrainian pipelines.

“The continuation of gas supply from the Ukrainian side will contribute to keeping gas prices low and help support the competitiveness of industries,” the companies emphasized in their joint declaration.

Economic and infrastructural risks

Without a transit deal, the region could face “significant economic damage,” according to SPP. Slovakia estimates losses of over €220 million ($231 million) if forced to source gas from alternative, pricier routes. For Ukraine, the cessation of transit could result in “irreversible damage to the Ukrainian gas infrastructure,” SPP warned.

However, the European Commission has downplayed these concerns, stating that the end of Ukraine transit has already been priced into the markets and will have a “negligible” impact on European gas prices overall.

Energy security challenges

Despite Europe’s broader push to cut dependence on Russian gas, landlocked nations in Eastern Europe still rely on cheaper pipeline supplies. Alternatives, such as importing liquefied natural gas via Germany, remain costly.

“The interruption of natural gas supplies through Ukraine will naturally also result in an increase in its prices on the markets,” Ferencz warned. “In addition, if a cold winter comes, this situation can cause a shortage of gas and problems with its supplies throughout Europe.”

With the clock ticking and the energy market volatile, all eyes are on Brussels to help broker a solution and avoid a winter energy crunch.

By Tamilla Hasanova