Moldova seeks Russian gas price discount ahead of end-2019 deal expiry

Highlights

– President set for talks on new Gazprom deal

– Moldova bought 2.94 Bcm of Russian gas in 2018

– New gas interconnector with Romania delayed

London – Moldovan President Igor Dodon was headed to Moscow Wednesday for talks about a new gas supply and transit deal with Gazprom – including a request for a gas price discount.

The former Soviet state of Moldova — like its larger eastern neighbor Ukraine — is concerned that its role as a transit country for Russian gas supplies to Europe is at risk due to the construction of the TurkStream and Nord Stream 2 bypass pipelines.

Like Ukraine, Moldovagaz’ gas supply and transit deal with Gazprom expires on December 31, 2019.

“We […] need to start negotiations with the Russian side to conclude a new gas supply contract and transit after January 1, 2020,” Dodon said on his Facebook page Tuesday.

“Experience of previous years shows that a delay in this process could jeopardize the country’s energy security, especially during cold periods of the year,” Dodon said.

Moldova was taken to the wire at the end of 2016 when its 10-year supply and transit deal with Gazprom expired, with a new three-year deal only revealed on January 5, 2017.

Under the deal, Moldovagaz agreed to extend the Russian oil-indexed gas import contract to the end of 2019 based on the same terms as the previous 10-year deal that ran from 2007 until the end of 2016.

 

PRICE RISE

Dodon said he would also seek a gas price discount from Gazprom after the price it pays for Russian gas under its oil-indexed contract rose by some 25% in the first quarter on the back of higher oil prices.

It paid some $237.46/1,000 cu m for its Russian gas in Q1.

“This topic will be addressed in my discussions with the Russian authorities and Gazprom management. A possible consensus in these negotiations would allow us to significantly reduce the need to raise domestic gas tariffs,” he said.

Last year, Gazprom supplied 2.94 Bcm of Russian gas to Moldova, which is also a key transit country for Russian gas supplies via Ukraine to Romania, Bulgaria, Greece and Turkey.

But with the construction of the 31.5 Bcm/year TurkStream pipeline and its European onshore extension, the route via Ukraine and Moldova could become obsolete.

 

ROMANIA INTERCONNECTOR

Moldova last year said it would not renew its Gazprom deal past end-2019 because it would be able to import gas from Romania with the construction of a new interconnector.

The 1.5 Bcm/year capacity pipeline is designed to allow total interconnection between the two systems and give Moldova the option to import larger volumes of gas from EU member Romania.

Romania — the EU’s third largest gas producer — has a gas production capacity of around 11 Bcm/year which it largely consumes domestically, but with new Black Sea projects set to come on stream in the coming years, Romania will likely have surplus gas to export.

It had been hoped that the new interconnector would be completed in time for gas to flow by end-2019, but work has been delayed and is not expected to be completed before summer 2020, forcing Moldova to shift its position on gas imports from Russia.

The pipeline project will complete the connection of the gas transmission systems of Romania and Moldova by linking Chisinau, a major area of gas consumption in the country, to the interconnector between the eastern Romanian city of Iasi and Ungheni.

The original Iasi-Ungheni link was built in 2014 and flows began in April 2015, but only tiny amounts of gas have flowed through the link since.

From Chisinau, gas could conceivably also then be sent into the Ukrainian system.

Recent infrastructure progress in southeastern Europe has paved the way for gas to flow south-north – which in theory would mean Greek-landed LNG could make its way northward through Bulgaria, Romania and Moldova to Ukraine.

However, industry sources have said the cost of flowing the gas such a long way would be prohibitively expensive compared with buying Russian gas.

 

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