The Vertical Gas Corridor, designed to connect Greece with Ukraine, is encountering significant hurdles in attracting commercial interest. Despite efforts to enhance its competitiveness through revised tariffs and flexible transport conditions, market participants remain hesitant regarding long-term gas bookings. The upcoming capacity auction scheduled for July is particularly critical, as the appetite for securing long-term commitments appears limited.
In Central and Southeastern Europe, while market conditions have shown improvement compared to previous auctions that fell short of expectations, companies are still cautious about making additional supply commitments. The ongoing flow of Russian gas into the region complicates the landscape, as uncertainty surrounding future European restrictions continues to deter long-term contracting approaches.
Initially anticipated as a key conduit for US LNG destined for Ukraine, the current gas supply situation in Ukraine has shifted. Domestic production now meets most consumption needs, resulting in a shortfall of approximately 2 billion cubic meters, which is addressed through existing import routes from Poland and Germany. Consequently, analysts predict that Ukraine’s involvement in the upcoming auction will be limited, prompting corridor operators to seek alternative regional demand centers to bolster utilization and growth.
The operational framework for the corridor has been updated to allow gas entry and exit at multiple points along its route, potentially broadening access to various markets within the region. However, trading activity remains low as many buyers continue to depend on existing supply contracts and spot LNG cargoes rather than committing to long-term transport capacity from the corridor.
Currently, the Vertical Gas Corridor ranks as the third most competitive option among seven available gas supply routes into Ukraine. Energy regulators are expected to finalize the revised tariff structure shortly, with announcements anticipated prior to the July capacity auction.
The corridor’s long-term viability hinges on Europe’s future approach toward Russian gas imports. Should Russian supplies be completely phased out, Europe may face an annual supply gap estimated at 18 to 20 billion cubic meters. This scenario could open significant opportunities for the Vertical Gas Corridor to deliver up to 4 billion cubic meters of gas competitively into the wider regional market.
