Romania key recipient of TurkStream gas as prices soar, Balkan lines uncertain

LONDON (ICIS)–Russian gas earmarked for Hungary is expected to be consumed in Romania throughout the summer amid high prices and uncertainty over transmission infrastructure in neighbouring countries, several market sources told ICIS.

Historically, Hungary has been importing Russian gas via Ukraine, offtaking 8.6 billion cubic metres (bcm) in 2020.

However, with the construction of the 31.5bcm/year TurkStream corridor – which was designed to reroute south-bound exports from Ukraine to the Black Sea, Turkey and on to the Balkans – Hungary has been expecting to offtake 6bcm/year of Russian gas via Serbia from this year, according to contractual terms.

FLOWS

An ICIS analysis shows that since the middle of March, Russian gas has been exported from Bulgaria to Romania and Serbia almost in equal measure, even though Romania was not supposed to receive gas shipped via the TurkStream corridor and its Balkan extensions.

According to the TurkStream project, Turkey is expected to receive some 14bcm of gas from the first string of the corridor, while 15.8bcm would be exported to Bulgaria and from there further to Greece, North Macedonia, Serbia and Hungary. Romania was not included in the TurkSTream route when the project was pitched.

Romania has been importing some 72GWh/day (6.8 million cubic metres/day) via the Kardam-Negru Voda 1 interconnection point, along the historic Trans-Balkan route.

Meanwhile, Serbia has off-taken an average 80GWh/day via the Kireevo-Zayechar point, according to data published by the transparency platform of the European Network of Transmission System Operators for Gas (ENTSOG).

ENTSOG data show that Serbia, which was supplied with Russian gas imported via Ukraine and Hungary, has no longer been receiving volumes via this route since 1 April.

However, there is no ENTSOG data showing that Serbia has been exporting Russian gas into Hungary.

Meanwhile, Romania has been ramping up imports from Bulgaria since mid-March, but exports to Hungary have averaged only 18GWh/day over the same period. This means that an average 54GWh/day may have been consumed domestically.

Romania has been a major importer of gas sourced in Hungary in recent years, but offtakes hovered around 10GWh/day since the beginning of 2021, compared to 56GWh/day in the first four months of 2020.

ROMANIAN PREMIUM

Several market sources told ICIS there may be two reasons why Romania has been mopping up most of the TurkStream gas that was expected to reach Hungary as part of the TurkStream arrangements.

Firstly, they pointed out that Romanian spot prices have been trading at a premium over Hungary.

For example, the Romanian spot price for 20 April traded at New Lei 112.78/MWh (€22.90/MWh) on the BRM gas exchange, compared to the Hungarian equivalent which traded at €21.71/MWh.

Romanian prices have been holding a premium over the Hungarian market in recent weeks as domestic production has been declining and demand was pushed up by below-average temperatures.

This means that instead of importing natural gas from Hungary, Romania offtook the Russian gas which was due to be exported to Hungary via the Balkan route, and consumed most of it internally.

As traders expect Romanian summer prices to trade some €2.00/MWh above Hungarian and Austrian hub prices, they say gas swaps with Hungary would continue, potentially making Romania the main recipient of Russian gas imported via TurkStream this year.

BALKAN INFRASTRUCTURE

Secondly, even if the Romanian summer premium were to shrink, making it less profitable for Hungarian companies to do gas swaps with Romania, there are uncertainties regarding the Balkan export route.

Serbia was expecting to ship some of the imported gas north into Hungary but there are no indications that deliveries have already started.

Meanwhile, a source active in Bulgaria said there were also questions regarding the 400km pipeline which was built in the country to transport natural gas east to west.

The pipeline, a development of Bulgarian transmission system Bulgartransgaz, does not include any exit points in the north-western part of the country, which requires access to natural gas.

An EU source said the pipeline would require certification from Bulgarian energy regulator EWRC under the 2009 European gas directive, as regulatory authorities are expected to monitor the continued compliance of grid operators.

Furthermore, transmission capacity along the line is thought to be reduced because compressor stations at Nova Provadia and Rasovo in north-eastern and north-western Bulgaria are still not operational.

Neither EWRC nor Bulgartransgaz responded to questions from ICIS by publication time.

If the Balkan capacity is not fully available in the upcoming months and the Romanian premium to Hungary ebbs away, Gazprom would have to continue shipping gas to Hungary via the historical Ukrainian route.