With the current transit contract for Russian gas through Ukraine expiring at the end of this year, it’s now a desperate scramble for Slovakia, Hungary, and (to a lesser extent) Austria to secure new deals for alternative gas, while the rest of the European Union watches from the sidelines, simply hoping that new deals don’t disrupt the market. The only silver lining is that EU gas storage is pretty much full for the winter, and meteorologists are predicting a mild one.
Last week, we saw Hungary’s MOL sign a unilateral deal with Russian Lukoil. And this week, we saw Slovakia’s SPP (the country’s main gas buyer) sign a short-term gas purchase contract with Azerbaijan’s state-run SOCAR. An extension of the Ukraine transit deal is highly unlikely to materialize because at this point it would be political suicide for the EU, though pro-Russian sentiments are that a Trump presidency could throw a spanner in the works that is favorable to Moscow. He won’t take office until January, however, and the deal expires at the end of December, so the scramble is on in full force. Slovakia’s move this week to cut another alternative supply deal further indicates that the country believes there will be no extension of the Ukraine transit deal. SPP has also entered into gas supply contracts with BP, Exxon, Shell, Eni and RWE to further diversify, but it comes at a high cost (almost $150M more than it would have spent on Russian gas).