Moldova’s Gas Prospects

Anton SHVETS Over the last years, Moldova has been losing its position as a country providing Russian gas transit to the EU countries and that led to huge amounts of profits lost. However, gas market reshaping in the region, in certain situations, may have a beneficial effect on the republic’s long-term interests. Within recent years, the volume of Russian natural gas transit through the territory of Moldova via the trans-Balkan pipeline has been rapidly decreasing. If about 20 billion cubic meters of Russian gas passed in 2017 through the republic's gas transportation system, then by 2019 this figure halved. In 2020, the situation got even worse - PJSC Gazprom plans to pump about 1 billion cubic meters of gas through Moldova, which is comparable to Moldova’s annual consumption (Transdniestrian region not included). The reasons for such a sudden drop are related to two factors: to the Turkish Stream launching and to changes on the international gas market situation. The Turkish Stream, which was commissioned last year with a capacity of 15.75 billion cubic meters of gas per year, together with the long-running Blue Stream fully cover the Turkey’s needs (no more than 30 billion cubic meters of Russian gas annually). Thus, Ankara no longer needs transit facilities to transport Russian gas since the required volumes are supplied directly through two gas pipelines at the bottom of the Black Sea. Along with, the most important factor of the current period was the prices fall for liquefied natural gas and its replacement with PJSC Gazprom not only for the Turkish market, but also for Romania and Bulgaria. Deliveries from Qatar, the United States and the same Russia have significantly undermined the trans-Balkan gas pipeline demand. Obviously, the capacities of European states to LNG regasification, as well as the seaports throughput (primarily in Romania and Bulgaria) are limited therefore, a slight adjustment in prices on the gas market is enough to partially restore Moldova’s transit potential next year. The prospects for the trans-Balkan gas pipeline remain good enough, at least until the moment Romania develops gas fields on the Black Sea shelf with an annual capacity of over 6 billion cubic meters of gas per year. Taking into account the lack of appropriate technologies and investors, reaching the targets is not even a question for the next 5 years. Russian gas transit will continue to bring profit to the Moldovan budget. For this reason, Moldova still has a strategic (primarily financial and infrastructural) interest in maintaining cooperation with the Russian monopoly PJSC Gazprom. This means that the Republic of Moldova will not, technologically, speed up the Iasi-Chisinau gas pipeline full operation. On Friday, the Prime Minister of Romania Ludovic Orban announced Transgaz Romania completed the long-awaited construction of the 120-kilometer section "Ungheni-Chisinau" (the section "Iasi-Ungheni" was commissioned back in 2014). The head of the Romanian government immediately outlined the project direction: “We provide the residents of Moldova with an alternative to Russian gas. This is an important investment that testifies to Romania's readiness to be close to the citizens of Moldova”. In fact, we can say that the physical interconnection of the gas transmission systems of Moldova and Romania (the European Union) has taken place. By the way, the gas pipeline can also operate in reverse mode - for the supply of Russian or Ukrainian gas to Romania through Moldova. Although it does not make much sense to consider such a capacity of it until the unlikely full load of the trans-Balkan highway. Meanwhile, reaching the design capacity of the Iasi-Chisinau gas pipeline will require time and additional infrastructure development - compressor stations constructing in Gheraiesti and Onesti, as well as modernizing a number of the gas pipeline sections on the Romanian side. Even by the end of 2021, the gas pipeline will no way be able to cover the Republic of Moldova’s demand (together with Transdniestria, it amounts to at least 2.5 billion cubic meters), since it will provide pumping with proper investments in the optimistic scenario no more than 2 billion cubic meters of gas. These figures’ order, however, seems to be quite solid, given that relations with Transdniestria may take an unpredictable trajectory development, up to the suppliers’ diversification. That is, Moldovan traders will be able to buy gas in the west with its delivery along the Iasi-Chisinau route while the left bank will continue cooperating with PJSC Gazprom and receive gas in transit through the Ukrainian gas transportation system. At the same time, the availability of filling sources is as important as the throughput capacity of the Iasi-Chisinau gas pipeline, to implement this crisis scenario of separation. This is where the already mentioned problem arises - until the effective development of the Black Sea shelf, Romania does not even cover its own needs for natural gas, therefore, any of its exports can have exclusively political and symbolic significance. On Tuesday, Nord Stream 2's key contractor, Uniper, acknowledged in its report the possibility of delays or even halts in the pipeline's construction, linking the issue directly to increased US efforts on targeted sanctions. This statement in the current circumstances looks quite natural, since the lobby of the project in Germany and a number of other EU countries is obviously losing the fight to American legislators. In this situation, PJSC Gazprom will have to willy-nilly revise its development strategy and rely on the use of existing highways and minimization of irrational spending during the crisis. The strategy of diversification and withdrawal from Ukraine (with the parallel production of giant projects in the interests of management) obviously did not justify itself and that gives Moldova a unique opportunity to self-actualize as a transit partner. There has always been a lot of both economics and politics in gas issues. The pro-European opposition has already accused the Moldovagaz leadership and the Moldovan President of close ties with the Russian monopoly. In practice, the gas topic deserves the most scrupulous and rational analysis in terms of “profit” and “economic development”, and this is the path that the current government of Moldova should take.