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The European market is the anchor for Gazprom's EBITDA generation.
S&P Global Ratings says that the lack of a sustainable transit agreement poses a long-term risk for Gazprom's export.
"In the longer term, we believe that the lack of a sustainable transit agreement is a long-term risk for Gazprom's export volumes and market position," S&P experts said in a statement on March 5.
"Customers' concerns over supply security reduce the attractiveness of Gazprom's pipeline gas compared with other fuels, and make gas through alternative pipelines or liquid natural gas more attractive. This factor may eventually affect the regulatory treatment of Gazprom's proposed alternative routes, in our view," they said.
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"We understand that, despite ongoing disagreements, physical gas shipments to Europe across Ukraine continue," the experts said.
About half of Gazprom's exports to Europe crosses Ukraine, and its dependence on transit through Ukraine will remain high, at least before North Stream 2 and Turkish Stream come online, which Gazprom plans in 2019. "If and when North Stream 2 and Turkish Stream come online, however, we believe the Ukrainian route could still be necessary to meet seasonal demand peaks and specific customer demand. We consider its relative economic attractiveness will depend on the eventual transit tariff, the physical condition of Ukraine's heavily underinvested pipelines, and on Gazprom's existing ship-or-pay agreements with European gas-pipeline operators," S&P said.
S&P experts said they would monitor Gazprom's actual transit volumes to Europe, any signs of gas diversion in the Ukraine, and Gazprom's progress with obtaining regulatory permits for Nord Stream 2. "We would view any significant supply interruptions or regulatory delays as significantly credit negative," they said.