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Ukraine gas networks costly, Gazprom says

Russian company sends the bulk of its gas to Europe through Soviet-era pipelines in Ukraine.

By Daniel J. Graeber
Ukraine gas networks costly, Gazprom says
It may be cheaper for Russia to find an alternative to legacy gas pipelines in Ukraine, an executive said from St. Petersburg. Photo by tcly/Shutterstock

ST. PETERSBURG, Russia, June 16 (UPI) -- It will be less expensive for Russian natural gas to move through a pipeline system in the Baltic Sea than through Ukraine, a Gazprom official said.

Europe gets about a quarter of its natural gas needs met by Russia, though the bulk of that gas runs through Soviet-era pipelines running through Ukraine. Contractual disputes during the previous decade disrupted supplies through Ukraine and geopolitical crises have put recent strains on legacy networks for Russian gas.

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Alexei Miller, the chairman of Russian energy company Gazprom, said it may be cheaper to send gas through a second string of pipelines planned for the Nord Stream network running through the Baltic Sea to Germany.

"The Nord Stream 2 transport tariff stands at $2.10 per 1,000 cubic meters for 100 kilometers," he said from the sidelines of an energy conference in St. Petersburg. "The transport tariff via Ukraine totals $2.50, which means transit via Ukraine is 20 percent more expensive."

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For Gazprom, that means continuing to push gas through Ukrainian networks could result in as much as $43 billion in extra expenses.

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Gazprom signed shareholder agreements on the development of the second phase of the twin Nord Stream pipeline system last year. Under the proposed expansion, two more lines would be added to the existing network, roughly doubling the system's net capacity.

The European Union has expressed concern about Russia's control over the regional market as the Russian gas company typically controls both the transit networks and the reserves they deliver. Maros Sefcovic, a European leader on energy issues, said the expansion of Nord Stream would "alter the landscape" of the regional energy sector by blocking new sources and suppliers in Europe.

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