Eusebio R. Sheffield 
Main observations:
- At the end of April, Gazprom – a Russian gas company – stopped supplying Poland and Bulgaria due to its refusal to pay for gas in roubles, which raised new concerns about EU energy security and the need for strategic diversification of energy resource imports.
- Historically, Russia is the largest gas supplier to the EU, increasing its share of total imports from 21% in 2005 to 31% in 2020. According to forecast data from GTASin 2021, Russian gas exports to the EU accounted for 36.5% of total gas imports excluding intra-EU trade.
- At this point, furthercut off Russian supply to Europeis not planned. Poland and Bulgaria have already started to diversify their gas supplies and are likely to replace Russian gas by increasing imports from already existing trading partners, minimizing the threat of shortages.
- Longer termtrend to diversify gas imports is expected in the majority of EU economies. Dependence on Russian gas will gradually decrease and will likely be replaced by existing regional suppliers (e.g. Norway or Algeria) and the world’s other largest gas exporters (the United States, Qatar or the United States). ‘Australia). The overhaul of the European Union’s energy security may create opportunities for new exporters of natural resources from emerging markets.
Deliveries of Russian gas to Poland and Bulgaria were suspended on April 27. Polish state-controlled gas supplier PGNiG has informed that “the company has refused to pay Gazprom for gas under the Yamal contract in roubles”, this is after the Russian law was amended on March 31 which required that gas payments be made to the new special Gazprombank accounts, with payment made in the prescribed contract currency (usually in euros or US dollars) for subsequent conversion into rubles.
From a global or regional perspective, the two economies are not considered major players in the gas market in absolute terms. In 2021, Poland and Bulgaria were ranked as the 10th and 18th largest EU importers and accounted for 1.5% and 0.02% of total EU imports respectively. On the other hand, such signals sent by Russian officials to EU Member States have launched a broad discussion on a possible further escalation of intentional supply disruptions and other forms of retaliation for the whole Community. . Below, based on the GTAS forecast data, we try to estimate the degree of diversification of the EU gas trade and formulate the short and long term implications.
Historical trends
According to GTAS Forecasting estimates, over the period 2005-2021, the volume of imports of natural gas, petroleum gas and gaseous hydrocarbons to the European Union followed a slightly upward trend, reaching the maximum value of 308.7 MT in 2019. In 2021, imports equaled 294.6 MT, or about 25% of the total world trade in this commodity.
In terms of value, total imports have been more volatile due, among other things, to the pass-through of gas prices. The peak value of imports was observed in 2012, with two major declines over the last decade – in 2014 and 2020. In general, over the period 2005-2021, the value of total EU gas imports followed a volatile horizontal trade.
At country level, the largest importer of gas into the EU in 2021 was its largest economy – Germany – responsible for more than a third of all EU gas imports by value (35 .2 billion USD), followed by Italy (15.0 billion USD). ) and France (13.1 billion USD). The value of imports from the top three EU countries represents almost two-thirds of total imports.
Sources of EU gas imports
On the supply side, the largest gas exporter to the EU was Russia, responsible for 29.9% of total EU imports, more than twice as much as the second biggest exporter – Norway (14 .1%) and three times more than the third – Algeria (9.1%). Excluding intra-European Union trade, dependence on Russian gas is slightly higher and amounts to 36.5% according to GTAS Forecasting estimates.
As shown in the graphs above, the volume and value volatility of Russian gas imports show lower volatility from 2005 to 2021 compared to total EU imports, while following similar trends – volume slightly increasing and generally horizontal value. At the same time, the share of Russian gas in total imports has increased from 21% in 2005 to a maximum of 31% in 2020.
In terms of transportation modes, the majority of natural gas is imported through the GTAS “land and other” forecast category, which primarily includes pipelines in this case. The remaining imports are transported by sea – over the period 2005-2021 seaborne trade ranged from 29% to 41%. The composition of transport modes is generally stable over time.
Our goal: Poland and Bulgaria
It is expected that the cut in supplies from Poland and Bulgaria will not trigger a wider cut in Russian supplies to Europe, this remains a strategic issue for both economies. Poland’s contract with Gazprom was set to expire on September 30, 2022, when it would have access to Norwegian gas through the Baltic Pipe, which is currently under construction. Until then, Poland must use the reverse on the Yamal gas pipeline and import gas from the German market, via the two interconnection points on the German-Polish border.
There also does not appear to be any reduction in gas transit through Bulgaria, but continued gas transit through Poland to Germany is questionable given Poland’s decision to freeze the Gazprom’s share in EuroPol (the entity that owns the Polish section of the Yamal-Europe Gas Pipeline). However, these flows had already decreased considerably in the first quarter of 2022 and fell to zero in April 2022.
Poland and Bulgaria have developed infrastructure to reduce imports of Russian gas. Now Bulgaria can import LNG and gas pipeline via Greece via the current interconnector at Kulata and the new Greece-Bulgaria Interconnector (IGB) was connected to the Trans-Adriatic Gas Pipeline (TAP) in March. Furthermore, other connections with the Bulgarian and Greek networks should follow soon, while on the Polish side the construction of a new LNG terminal in Gdańsk is widely discussed.
Consequences
From an international trade perspective, the EU’s dependence on Russian gas imports is expected to remain stable despite the situation in Poland and Bulgaria. A further escalation of supply disruptions is unlikely. In the case of Poland and Bulgaria, trade diversion will most likely take place, spreading shortages between already existing major trading partners and neighboring economies (eg, imports from Germany to Poland).
On the other hand, in the longer term, a trend of diversification of gas sources is expected, not only in Eastern Europe but also in the largest EU economies, including Germany. . In this case, dependence on Russian gas will gradually decrease and will most likely be replaced by already existing regional gas suppliers, such as Norway or Algeria, as well as the world’s largest gas exporters – the United States, Qatar or Australia. Finally, with some probability, the European Union’s energy security overhaul could create an opportunity for new exporters of natural resources from emerging markets, such as Nigeria, among others.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
