Moldova, Ukraine backhaul to unlock Trans-Balkan gas corridor

LONDON (ICIS)–Moldova has implemented a critical technical procedure on the border with Ukraine which will unlock alternative gas flows along one of Europe’s most important gas transit routes.

The Ukrainian gas transmission system operator GTSOU confirmed Moldova has been nominating volumes in virtual reverse mode on the Trans-Balkan pipeline since 28 September, allowing the two countries to net out volumes.

In the long-term this means that the Trans-Balkan corridor, which has historically allowed the transit of Russian gas from Ukraine to the Balkans and Turkey via Moldova and Romania is now also fully operational in reverse direction thanks to this latest introduction of backhaul. The total north-to-south capacity of the pipeline is over 20 billion cubic meters (bcm)/year.

In practical terms this means that in a scenario where Ukraine were interested in importing gas as LNG via Turkish or Greek terminals, the volumes would be physically exported to southern Moldova via the Trans-Balkan pipeline.

In exchange, Ukraine – which transits Russian gas to Moldova – would retain the equivalent amount on its side of the border, effectively netting volumes out.

The gas does not have to be of Russian origin since Moldova can now secure quantities on central European markets via Ukraine and net them out against volumes imported from the Balkans or Turkey.

Speaking to ICIS, Andrii Prokofiev, head of the division of cooperation with clients at GTSOU said the decision by Moldova to implement virtual reverse flows, also known as backhaul, was one of the last obstacles holding up the unlocking of the Trans-Balkan pipeline.

CHANGING DIRECTION

Historically gas has been flowing only north to south but following the expiry of many transit agreements with Russia’s Gazprom and the rerouting of the Russian transit to the new TurkStream pipelines, the Trans-Balkan corridor has been upgraded to operate in reverse direction as well but only up to the Ukrainian-Romanian border.

Earlier this summer, GTSOU said it would be offering physical import capacity from Moldova to Ukraine but the capacity is small – 4 million cubic metres mcm/day – compared to the historical exit capacity from Ukraine to Moldova which is close to ten times higher.

Prokofiev said GTSOU was working on increasing the physical capacity in the upcoming months.

Nevertheless, the backhaul option allows for much larger volumes to be netted out.

The implementation of the backhaul option comes just before the start of the heating season on 1 October, offering Moldova a degree of protection in case Russia reduces gas supplies as it happened last year.

It could also allow Moldova to sell gas to Ukraine to raise money to pay for the Russian supplies imported under a long-term contract.

The Moldovan backhaul has been discussed for at least three years but has been delayed because the customs offices required guidance on how it could be adopted in domestic legislation.

Moldovan authorities are expected to publish the legal documents formalising the procedure in the upcoming days.