- The supply disruption has reduced the capacity of the Nord Stream 1 pipeline to one-fifth of its total capacity. The drop comes less than a week after the pipeline was restarted after 10-day maintenance period.
- Moscow blamed the disruption on the delayed return of a serviced turbine and sanctions, while Brussels accused Russia of using energy as a weapon. European politicians have warned Russia that gas supplies could be cut off completely this winter.
- This would plunge Germany into recession and send consumer and industrial prices even higher. The Dutch wholesale gas price for August was up 7% at 210 euros per megawatt hour, up 400% from a year ago.
FRANKFURT/LONDON, 27 JULY – Russia delivered less gas to Europe on Wednesday, escalating an energy standoff between Moscow and the European Union, making it more difficult and expensive for the bloc to fill storage ahead of the winter heating season.
The supply disruption, announced earlier this week by Gazprom (GAZP.MM), has reduced the capacity of the Nord Stream 1 pipeline, Russia’s main delivery route to Europe, to one-fifth of its total capacity.
Nord Stream 1 accounts for approximately one-third of Russian gas exports to Europe.
On Tuesday, EU countries approved a weakened emergency plan to reduce gas demand after striking compromise deals to limit cuts for some countries, hoping that lower consumption will mitigate the impact if Moscow cuts off supplies entirely. more info
The plan highlights concerns that countries will be unable to meet goals for replenishing storage and keeping their citizens warm during the winter months, and that Europe’s fragile economic growth will suffer further if gas is rationed. more info
Analysts at Royal Bank of Canada said the plan could help Europe get through the winter if Russian gas flows are at 20-50 percent capacity, but warned against “market complacency European politicians have now solved the issue of Russian gas dependence.”
While Moscow blamed the supply cuts on the delayed return of a serviced turbine and sanctions, Brussels accused Russia of using energy as a weapon to blackmail the EU and retaliate for Western sanctions over its invasion of Ukraine.
Vitaly Markelov, deputy CEO of Gazprom, stated that the company has yet to receive a Siemens turbine used at Nord Stream 1’s Portovaya compressor station, which has been serviced in Canada. more info
Markelov stated that the machinery was subject to sanctions, while Siemens Energy stated that Gazprom was required to provide customs documents in order to return the turbine to Russia.
‘GAS SAVING’
Physical flows through Nord Stream 1 fell to 14.4 million kilowatt hours per hour (kWh/h) between 1200-1300 GMT on Wednesday, down from around 28 million kWh/h the day before, representing just 40 percent of normal capacity. The drop comes less than a week after the pipeline was restarted after a 10-day maintenance period.
FILE PHOTO: Pipes at the Nord Stream 1 gas pipeline’s landfall facilities in Lubmin, Germany.
Pipes at the Nord Stream 1 gas pipeline’s landfall facilities in Lubmin, Germany, on March 8, 2022. REUTERS/Hannibal Hanschke/ European politicians have repeatedly warned Russia that gas supplies could be cut off completely this winter, plunging Germany into recession and sending consumer and industrial prices even higher.
On Wednesday, the Dutch wholesale gas price for August, the European benchmark, was up 7% at 210 euros per megawatt hour, up around 400% from a year ago.
Germany, Europe’s largest economy and its largest importer of Russian gas, has been particularly hard hit by supply cuts since mid-June, necessitating a 15 billion euro ($15.21 billion) state bailout for its gas importer Uniper (UN01.DE).
Italy, another major importer that typically receives 40% of its gas from Russia, would face a gas supply crisis at the end of the coming winter if Russia completely ceased supplies, Ecological Transition Minister Roberto Cingolani warned. more info
Uniper and Eni (ENI.MI) in Italy both reported receiving less gas from Gazprom than in recent days.
Christian Lindner, Germany’s finance minister, said he was open to using nuclear power to avoid an electricity shortage. more info
Germany has stated that if Russia cuts off its gas supply, it may be able to extend the life of its three remaining nuclear plants, which generate 6% of its power.
Klaus Mueller, Germany’s network regulator, said the country could still avoid a gas shortage that would necessitate rationing, while urging households and industry to “save gas.”
However, German industry groups have warned that companies may be forced to cut production in order to save more money, citing slow approval for replacing natural gas with other, more polluting fuels. more info
Mercedes-Benz (MBGn.DE) CEO Ola Kaellenius stated that a combination of efficiency measures, increased electricity consumption, lower temperatures in manufacturing facilities, and switching to oil could reduce gas use by up to 50% within a year, if necessary.
Germany is currently in Phase 2 of a three-stage emergency gas plan, with the final phase taking effect once rationing cannot be avoided any longer.
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