How does this company make money?
The company sells gas by the thousand cubic metres. Most of that gas is sold under long-term contracts where the price is tied to oil prices, but some is also sold on the spot market through European gas trading hubs at whatever the going rate is. On top of that, the company collects transit fees when other gas producers pay to move their own gas through the pipeline network.
What makes this company hard to replace?
Building an LNG import terminal and the regasification equipment to go with it takes several years before a single delivery can happen. Homes and factories connected to the gas grid would need expensive retrofitting to run on different fuels. Many buyers are also locked into long-term take-or-pay contracts that require them to pay for minimum gas volumes whether they use it or not, with some of those contracts running into the 2030s.
What limits this company?
The metering and compression equipment at border crossings like Velke Kapusany and Mallnow can only pass a fixed amount of gas each day. No matter how much is produced in Siberia, nothing extra can get through once those crossings are at their limit. Expanding them would require permits from multiple countries and would take decades, not years.
What does this company depend on?
The company cannot function without Siemens gas turbines to run its compressor stations, access to transit pipelines through Ukraine and Belarus, metering and import infrastructure at specific European border crossings, permits from the Russian Federal Service for Environmental oversight for Yamal Peninsula operations, and specialized Arctic drilling equipment for extracting gas from permafrost ground.
Who depends on this company?
German industrial manufacturers rely on a steady baseload supply and would face production shutdowns if it stopped. European households heating their homes in winter cannot quickly switch away from gas. Turkish power generation facilities are tuned to specific pipeline pressure levels. Hungarian chemical plants need a continuous flow of gas as a feedstock to produce ammonia.
How does this company scale?
Drilling extra wellheads inside existing Siberian fields and connecting them to the network is relatively cheap and fast — production volume can grow that way. But moving that extra gas to new customers requires new cross-border pipelines, which need permits from multiple sovereign countries and take decades to complete. Production can expand; delivery routes cannot keep up.
What external forces can significantly affect this company?
European Union sanctions target the financing and technology transfers the company depends on. Because global energy markets price gas in U.S. dollars, swings in the dollar affect the company's ruble-based costs. And as European countries pass climate regulations, their long-term appetite for gas commitments is shrinking, reducing the size of the market the company can count on.
Where is this company structurally vulnerable?
The pipeline runs through Ukraine and Belarus, and either country can shut off access with a single policy decision. Separately, if a sanctions regime were to block the maintenance of Siemens turbines inside the compressor stations, the gas would stop moving just as surely — because there is no way to reroute around that mechanical requirement by spending more money.
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