Russia's Gazprom will halt gas supplies to Moldova's Moldovagaz as of Jan 1

Gazprom will suspend natural gas deliveries to Moldova's Moldovagaz starting on Jan. 1 over outstanding gas debts and payment issues, the Russian gas giant said Dec. 28.

In a statement on its official Telegram channel, Gazprom said that Moldova had refused to settle debts accrued for gas supplies and that Moldovagaz had regularly failed to meet its payment obligations under the current contract.

It said that supplies would fall to zero at 8:00 Moscow time on Jan. 1, with the restriction set to remain in effect until it notified Moldovagaz otherwise.

"Gazprom reserves all rights, including the right to unilaterally terminate the contract and demand compensation from Moldovagaz for all losses and payment of fines for Moldovagaz's failure to fulfill and/or improper fulfillment of its obligations under the contract," the Russian company said.

Moldova's gas demand is split between the Republic of Moldova on the right bank of the Dniester (around 1.2 Bcm/year) and the more industrialized breakaway region of Transnistria on the left bank (2.1 Bcm/year).

Under the contract with Moldovagaz, Gazprom currently supplies some 5.7 million cu m/d of gas via Ukraine, which is redirected for consumption to Transnistria.

The Republic of Moldova no longer consumes Russian gas and instead uses imports from neighboring European countries.

However, the supply of gas to Transnistria is key to Moldova because it is supplied with electricity from the MGRES thermal power station in the breakaway region.

Moldova declared a 60-day state of emergency Dec. 16 due to the "major risk" to energy security across the country.

Moldovagaz purchases

In a statement Dec. 28, Moldovagaz said it had taken note of Gazprom's decision to halt supplies as of Jan. 1.

"Moldovagaz has contracted the necessary volumes of gas, which will fully ensure the consumption of the right bank of the Dniester until the end of March 2025," it said.

It stressed that the 5.7 million cu m/d of supply from Gazprom was redirected by Moldovagaz to the Transnistria region.

Moldova has warned that if gas supplies to Transnistria were halted, there was a risk that the region could collapse.

The decision by Gazprom also comes as the five-year gas transit agreement between Russia and Ukraine is due to expire at the end of 2024.

Without a new deal, deliveries to Transnistria had been due to be suspended in any event.

Russia currently supplies some 42 million cu m/d of gas to Europe via the Sudzha interconnection point on the border with Ukraine, supplying Slovakia, Austria and Italy as well as Moldova.

Russian President Vladimir Putin said Dec. 26 that it would be "impossible" to agree to any Ukrainian gas transit deal before the end of the year.

There have been proposals for alternative supplies via third parties including Azerbaijan, but these talks have so far failed to result in concrete agreements.

Gazprom had said Nov. 25 that it was looking at options for the continued supply of gas to Moldova after the Russia-Ukraine gas transit deal expires but no arrangements were put in place.

But Moldova's energy ministry said Dec. 17 that Gazprom did not book any capacity in the Trans-Balkan gas pipeline route for the month of January in the latest monthly capacity auction.

Under its winter plan published earlier this year, the Moldovan ministry said one of its planning scenarios was that Gazprom could continue to provide gas to Transnistria but via a different route using the offshore TurkStream pipeline and the Trans-Balkan link.

But the auction results suggested Gazprom was not planning to use the route for deliveries to Transnistria.

Uncertainty around Russian gas supplies to Europe continue to weigh on prices. Platts assessed the Dutch TTF month-ahead contract at Eur47.435/MWh Dec. 27, up from Eur39.775/MWh on Dec. 16.

Debt dispute

Moldovagaz and Gazprom have long been in dispute about historical gas debts, which again came to the fore in 2023 following an external independent audit of the alleged debt.

Moldova's energy ministry said in September 2023 that much of the debt claimed by Gazprom -- said to total some $709 million -- was "unconfirmed or at least unenforceable".

The ministry said the government of Moldova -- as a minority shareholder in Moldovagaz -- proposed that Moldovagaz pay just $8.6 million following the results of the audit report.

Gazprom said at the time it "categorically" disagreed with the ministry's comments and would defend its interests "in every possible way".

Gazprom had already previously threatened to halt gas supplies to Moldovagaz if it did not settle its historical debts.

The Moldovan energy ministry, meanwhile, has already made a number of provisions aimed at securing electricity supply ahead of the likely end of Russian gas supplies to the Transnistria region.

Electricity consumption in winter reaches up to 850 MW during peak hours and the ministry said it would mobilize "all domestic sources of production", including the combined heat and power plants of Termoelectrica and CET Nord which will cover consumption of around 200 MW.

Another 100 MW has already been contracted by state utility Energocom from the Cernavoda nuclear power plant in Romania at a capped price, while a further 100 MW is to be contracted from OMV Petrom's Brazi thermal power plant.

The Costesti-Stanca hydropower plant in Romania can also cover up to 10 MW of consumption.

The ministry also said renewable energy sources in winter can deliver variable amounts of energy from 50 MW up to 150 MW in certain hours, depending on weather conditions, while up to 200 MW could be purchased from the Romanian electricity exchange OPCOM to cover consumption peaks.