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EU gas supply secure even if Russia, Ukraine fall out - study

FRANKFURT (Reuters) - Europe will not run short of gas this winter even if a new deal for deliveries of Russian gas through Ukraine is not completed when the existing agreement lapses at the end of the month, a German study said on Wednesday.

“Gas supply for the winter is secure, even if the talks about gas shipments from Russia via Ukraine to Europe were to fail,” said the study, carried out by the Institute of Energy Economics (EWI) in Cologne.

It said German gas prices could rise moderately but there would not be any delivery disruptions.

Storage facilities were full, prices were at multi-year seasonal lows due to global oversupply, and interconnection was far better than 10 years ago when Russia and Ukraine rowed over prices and payments, it said.

Moscow says it does not want a “gas war” with Ukraine like the one in 2009 which led to supply disruptions in many European countries before the current agreement was signed.

The deal, which covers Russian supply to Ukraine and transit to the European Union (EU), expires on Dec. 31, and talks on a replacement are complicated by issues such as arbitration proceedings and Russia’s annexation of Crimea in 2014.

Disruption of transit to Europe through Ukraine in January 2020 could result in a drop in Russian gas exports to the EU by 6.3 billion cubic metres (bcm) that month, an EWI scenario showed. Underground storage would supply 83% of the shortfall and imports of liquefied natural gas (LNG) the rest, it said.

This would push up German prices by 5% and those in Greece by 45%. The latter is isolated from the main European gas grid.

An extremely cold weather scenario in Europe on top of the disruption could be priced in a little higher, EWI scenarios showed.

It said three months of supply were also safe, should a crisis drag on through March, the official end of the winter season for the gas market.

Russia has said more trilateral talks could be held on Thursday if the companies involved, Russia’s Gazprom and Ukraine’s Naftogaz, were ready. Naftogaz said last week there was still a long way to go.

Russian President Vladimir Putin and his Ukrainian counterpart Volodymyr Zelenskiy could discuss any problematic issues when they meet on Monday in Paris, the Kremlin has said.

In 2011, the Nord Stream 1 pipeline under the Baltic Sea went into service to land up to 55 bcm in Germany, already bypassing Ukraine, while a related pipeline, Nord Stream 2, is due to begin operations around mid-2020, doubling capacity.

Reporting by Vera Eckert; additional reporting by Matthias Williams; editing by Philippa Fletcher