Could Belarus import gas via Poland through the Yamal gas pipeline after the transit deal expires? In theory – yes. However, in practice it will be very difficult – writes Wojciech Jakóbik, editor in chief at BiznesAlert.pl.
Belarus’s gas pipelines under Russian control
Since the beginning of May Lithuania’s energy ministry has been hinting that it was possible to deliver LNG via Klaipeda to Belarus through the Poland-Lithuania gas pipeline (GIPL) that will be ready in 2021. “As part of a huge gas market, aspects of commercial benefits become apparent, including opportunities to participate in the Polish and European markets, offer new instruments in gas trade and increase usage of the LNG terminal in Klaipėda. Under favourable conditions, the GIPL will allow gas to be transported to or from Poland and other EU countries; with the application of additional technical solutions, it will also be possible to supply it to Ukraine or Belarus,” argues the ministry in a statement quoted by BiznesAlert.pl. Earlier, the Minister of Energy Žygimantas Vaičiūnas suggested that if Minsk was interested, his country would be ready to support the launch of “energy, oil and gas” delivery to Belarus.
The talks on delivering oil have been extensively written about elsewhere. Supplying electricity would be difficult because of infrastructural barriers, as well as Poland’s and Lithuania’s resistance to import energy from the Astravets nuclear power plant in Belaru, a project run by Russia’s Rosatom. So perhaps it would be possible to supply gas via Poland? It won’t be easy.
The Lithuanian minister mentioned a market swap transaction would allow to virtually deliver liquefied gas to Belarus. This pertains to transactions similar to those that are already taking place in Ukraine. There, the mechanism behind the so-called virtual reverse flow means that a portion of Russian gas stays in Ukraine as part of a settlement for the delivery from the West. At the same time, Vaičiūnas admitted that for this to happen cooperation with Russia would be necessary.
This is because in 2011 Belarus sold its gas transmission pipelines to Russia’s Gazprom. Basically a dispute over gas prices ended with Minsk selling its Bieltransgas company, which is currently known as Gazprom Belarus. In result, Russians control the Yamal gas pipeline section in Belarus, so they would have to prepare the system for virtual deliveries, or introduce technical changes (including those mentioned by the Lithuanian minister) necessary to start physical deliveries. Launching a reverse flow in the Yamal gas pipeline on the Polish-Belarusian border would require technical updates mirroring those on the Polish-German border, i.e. investments in gas pumping stations in Belarus.
New circumstances favor a reverse flow to Belarus
Despite these difficulties Minsk is already hinting at the fact that it’s looking for an alternative to the contract with Gazprom, that had been extended until the end of 2020 on terms questioned by Belarus. The country’s Minister of Energy, Viktor Karankevich called on Russia in April to revise prices in 2020. In order to make it possible gas would have to be purchased on the stock market where the price would be lower than the one calculated in accordance with the pricing formula included in the contract with Gazprom. Allegedly this solution is being negotiated on with Russia. In theory this could be an introduction to implementing a Belarusian virtual reverse flow and, in the future, a physical one in the Yamal pipeline.
It is expected that Gazprom won’t be interested in gas deliveries from the West since it can continue delivering gas from the East without allowing competition to access the Yamal pipeline in Belarus. Paradoxically the only reason why Russia could agree to installing the reverse flow capacity on the Polish-Belarusian border is a drop in transmission volume in the Yamal pipeline, which would be possible after the launch of the underwater Nord Stream 2 gas pipeline. This project is to be completed by the end of 2020, or in the first quarter of 2021 provided new delays do not occur. If NS2 prices were competitive, it could gradually replace Yamal with regard to deliveries to the CEE region. The first capacity bookings for the Nord Stream 2 section in Germany, i.e. the EUGAL pipeline, suggest this will happen. Today it is difficult to predict how the rivalry between gas transit projects in the CEE region – the Yamal pipeline (Belarus), the Soyuz pipeline (Ukraine) and Nord Stream 1 and 2 (Germany) – will end. Nevertheless this competition will take place in an increasingly transparent manner through platforms working in line with EU regulations.
On 18 May 2020 the transit contract for the Yamal pipeline section in Poland will expire. This means that in Poland access to the pipe will be possible on the basis of auctions. Therefore, in theory it could be possible for gas to be delivered to Belarus via Poland provided the infrastructure is adjusted. This means the gas from Klaipeda and Poland’s LNG terminal in Świnoujście as well as from Niechorze (landing site of the Baltic Pipe in Poland) could reach Belarus. The coronavirus pandemic caused a drop in gas demand and it may also decrease transmission via gas pipelines from Russia. It has already become apparent that Russia most probably did not book the entire capacity of Yamal’s Polish section and opted for 80% instead. If technical requirements were met, the remaining 20% could be used for deliveries in both directions, including Belarus, which would increase the profitability of the Polish section of the pipe owned by EuRoPol Gaz (stocks equally divided between Poland’s PGNiG and Gazprom), but managed, in line with EU regulations, by Gaz-System.
Enter the US
A little-known statement made by the US Ambassador to Lithuania Robert Gilchrist may suggest this scenario has received political support from America. The ambassador stated the US was interested in delivering natural gas to Belarus via the terminal in Klaipeda. “When I was in Washington there was a lot of interest in this topic and I held meetings on this subject at the Department of Energy,” Gilchrist said some time after the US State Secretary had visited Minsk where he declared America was ready to make Belarus independent of oil deliveries from Russia. Perhaps Americans would like to contribute to the diversification of gas deliveries to Alexander Lukashenko’s country, but if that’s true, Gazprom will be even less likely to agree to modernize the Belarusian gas pipelines that are under its control.