Vertical Gas Corridor faces muted demand ahead of July capacity auction as Russian-gas uncertainty weighs

The planned Vertical Gas Corridor, designed to connect Greece with Ukraine, is finding it difficult to convert improved competitiveness into commercial traction. Despite efforts to strengthen its offer through revised tariffs and more flexible transport conditions, the key issue ahead of the next major capacity auction in July is the limited willingness among market participants to commit to long-term gas bookings.

Improved auction track record, but caution persists

Conditions in Central and Southeastern Europe have improved compared with earlier auctions that failed to attract sufficient interest. Still, traders and utilities remain cautious about locking in additional supply commitments. They point to continued Russian gas flows into regional markets and highlight uncertainty over whether and how European restrictions on Russian imports may evolve—factors that discourage longer-term contracting strategies.

Ukraine’s near-term supply outlook reduces urgency

Ukraine, which was initially expected to be the main destination for US LNG transported via the corridor, faces a less severe supply situation than last year. Domestic production now covers most of consumption needs, leaving a shortfall of roughly 2 billion cubic meters. That gap is already being met through existing import routes from Poland and Germany, leading analysts to expect Ukraine’s participation in the upcoming capacity auction to be relatively limited.

Operators may need alternative demand centers

With Ukraine likely to take only modest capacity, corridor operators may have to shift attention toward other regional demand centers to support utilization and growth. The updated operational framework is intended to help by allowing gas to enter and exit at multiple points along the route, potentially broadening access across markets in the region.

Trading remains subdued despite flexibility

Even with those operational changes, trading activity has stayed subdued. Many buyers continue relying on existing supply contracts, spot LNG cargoes, and Russian pipeline gas rather than committing to long-term transport capacity through the corridor.

Tariff approvals expected before July auction

The Vertical Gas Corridor is currently ranked as the third most competitive option among seven available gas supply routes into Ukraine. Energy regulators are expected to finalize approval of the revised tariff structure in the coming weeks, with official announcements anticipated ahead of the July capacity auction.

Long-term prospects hinge on Europe’s stance on Russian imports

Experts say the corridor’s long-term viability will depend heavily on Europe’s future approach to Russian gas imports. If Russian supplies were fully phased out, Europe could face an annual supply gap estimated at about 18 to 20 billion cubic meters—creating a potential opportunity for the Vertical Gas Corridor to supply up to 4 billion cubic meters into the broader regional market on a competitive basis.