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Nord Stream 2, if launched at all, will not reduce gas prices in Europe—Vitrenko

Vitrenko on the Nord Stream 2 launch. Photo: Nord Stream 2 website

Vitrenko on the Nord Stream 2 launch. Photo: Nord Stream 2 website

The launch of Nord Stream 2 will not change prices on the European energy market downward. As Yuriy Vitrenko, the CEO at Naftogaz, reported in an interview with RBC-Ukraine, it might happen that the gas pipeline will not start operating at all.

According to him, the best option for Gazprom is now the launch of Nord Stream 2 in the fall of 2022. Naftogaz believes that the process may be delayed for longer or might not be completed at all with obtaining permission to start operation.

It was our deliberate policy to present (Russian President Vladimir—The Page) Putin with a choice. He must completely change the approach to gas supplies to Europe, remove geopolitics from this and pass up an opportunity to use gas as a weapon. Not just not to use, but to lose the opportunity... Putin was presented with a choice—either the European rules, or Nord Stream 2 will never be able to operate.

Yuriy Vitrenko

Yuriy Vitrenko

Acting Minister of Energy

The head of Naftogaz added that the opinion about the gas pipeline launch as the key to reducing gas prices in Europe is wrong. According to him, the Russian president wants not only to force the Europeans to return to the previous practice of concluding long-term contracts (without being tied to the market, hubs, and spots), but again to get the opportunity to use gas as a political weapon and a lever of influence in political agreements.

On the contrary, I would expect that with the Nord Stream 2 launch, Russia will physically stop transit through Ukraine. This will further burden the situation on the gas market in Europe. And unless Europe gives up and concludes long-term contracts with Putin on Putin's terms, then one should not expect at all that it is the NS 2 launch that will impact the price decline.

Yuriy Vitrenko

Yuriy Vitrenko

Acting Minister of Energy

One of the important factors that could impact the gas price reduction in Europe is the increase in the gas production and export by the United States and the countries of the Middle East.

Context. On December 21, the gas price in Europe reached its historical high. One of the main factors was the unwillingness of Russia not to reserve the capacity of the Yamal—Europe gas pipeline Polish section for December. The reduction of wind generation in Europe, cold weather, rapid reduction of reserves in European gas storage facilities (less than 60%), problems with the Nord Stream 2 launch, risks of a new Russian invasion of Ukraine and other factors are also helping to keep prices above $2,000.

Yesterday Gazprom did not reserve the capacity of the gas pipeline Polish section again, so the price of gas in Europe remains above $2,000.

Today the price of the January futures contract on TTF on the ICE Futures exchange is €165.5 per MWh, or almost $1,933 per 1000 cubic meters.

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