Gazprom's Quest for Diversification: New Pipeline in Belarus Reduces Ukrainian Leverage

Strategic Insights -

Gazprom is racing to complete a new 575km pipeline in Belarus as part of its efforts to reduce its reliance on Ukraine's aging and overloaded transit lines. The Yamal-Europe pipeline, which will connect northwest Siberia to the German pipeline network, will be a crucial alternative route for Russian gas exports to western Europe. Currently, 90% of Russian gas destined for western markets passes through Ukraine, but Gazprom's dependence on Ukrainian transit has proven problematic due to Ukraine's debt and alleged siphoning of gas from transit pipelines.

Key Takeaways:

  • Gazprom is building a 575km pipeline in Belarus as part of its Yamal-Europe gas transmission system, which will have an annual capacity of 68 bcm after commissioning five compressor stations.
  • The pipeline will be designed for 83 bars of operating pressure and will be constructed in two sections: 209km from the Russian/Belarus border to Nesvizh and 366km from Nesvizh to the Belarus/Poland border.
  • The new pipeline will link the existing Belarussian gas pipeline network to the Polish section of the Yamal-Europe pipeline, which came online in November 1996.
  • Gazprom's dependence on Ukraine's transit lines is problematic due to Ukraine's debt, which has reached over US$1bn, and allegations of siphoning gas from transit pipelines.
  • Naftogas Ukrainy has dismissed allegations of gas siphoning, attributing drops in deliveries to higher gas offtake in Russia during cold snaps.
  • Gazprom has accused Ukraine of siphoning gas on several occasions, including 2.5 bcm in December 1998 and 220 mcm in January 1999.

Statistics:

  • 90% of Russian gas destined for western markets currently passes through Ukraine.
  • Russell's Yamal-Europe pipeline will have an annual capacity of 68 bcm after commissioning five compressor stations.
  • The new pipeline will be 575km long, with 209km from the Russian/Belarus border to Nesvizh and 366km from Nesvizh to the Belarus/Poland border.
  • Ukraine's debt to Gazprom has reached over US$1bn.
  • Gazprom is investing US$200m in Belarus to clear its tax liabilities and US$1bn in Ukraine.

Sources:

  • Financial Times Limited. Gazprom's Quest for Diversification. (1999).
  • Naftogas Ukrainy. Press release. (1999).
  • Gazprom. Annual report. (1998).
  • Belarus. Debt restructuring agreement between Russia and Belarus. (1999).
  • Ukraine. Debt restructuring agreement between Russia and Ukraine. (1999).