Russia further cuts gas flows as Europe pleads for savings

Pipes from the Nord Stream 1 gas pipeline landing facilities are pictured in Lubmin, Germany March 8, 2022. REUTERS/Hannibal Hanschke/

Join now for FREE unlimited access to Reuters.com

BERLIN/FRANKFURT, July 27 (Reuters) – Russia delivered less gas to Europe on Wednesday in a further escalation of an energy standoff between Moscow and the European Union that will make it harder and more costly for the bloc to fulfill storage before the winter heating season.

The cut in supplies, reported by Gazprom (GAZP.MM) earlier this week cut the capacity of the Nord Stream 1 pipeline – the main route to Europe for Russian gas – to just a fifth of its total capacity.

Nord Stream 1 accounts for around a third of all Russian gas exports to Europe.

Join now for FREE unlimited access to Reuters.com

On Tuesday, EU countries approved a weakened contingency plan to curb gas demand after reaching compromise deals to limit cuts for some countries, hoping lower consumption would lessen the impact in case Moscow completely stops the supply. Read more

The plan highlights concerns that countries will not be able to meet their targets for recharging storage and keeping their citizens warm during the winter months and that Europe’s fragile economic growth could be a another blow if gas were to be rationed. Read more

Royal Bank of Canada analysts said the plan could help Europe weather the winter provided gas flows from Russia are at 20-50% capacity, but warned against “complacency in the market. European politicians have now solved the problem of Russia’s gas dependence”.

While Moscow blamed various technical problems for the supply cuts, Brussels accused Russia of using the energy as a weapon to blackmail the bloc and retaliate against Western sanctions over its invasion of Ukraine.

Kremlin spokesman Dmitry Peskov said Gazprom was supplying Europe with as much gas as possible, adding that technical problems related to sanctions were preventing it from exporting more. Read more

‘SAVE GAS’

On Wednesday, physical flows via Nord Stream 1 dropped to 14.4 million kilowatt hours per hour (kWh/h) between 10:00 a.m. and 11:00 a.m. GMT from around 28 million kWh/ha the day before, already barely 40% of normal capacity. . The drop comes less than a week after the pipeline restarted after a scheduled 10-day maintenance period.

European politicians have repeatedly warned that Russia could completely shut off gas flows this winter, plunging Germany into recession and driving up prices even further for consumers and industry.

The Dutch wholesale gas price for August, the European benchmark, jumped 9% to 205 euros per megawatt-hour on Wednesday, up around 412% from a year ago.

German Finance Minister Christian Lindner said he was open to using nuclear energy to avoid a power shortage. Read more

Germany has said it could extend the life of its three remaining nuclear power plants, which account for 6% of the country’s overall energy mix, in the face of a possible Russian gas cut.

Klaus Mueller, head of Germany’s grid regulator, said the country could still avoid a gas shortage that would lead to its rationing.

Germany, Europe’s biggest economy and biggest importer of Russian gas, has been particularly hard hit by supply cuts since mid-June, with its gas importer Uniper (UN01.DE) requiring a 15 billion euro ($15.21 billion) state bailout as a result.

Uniper and the Italian Eni (ENI.MI) both said they had received less gas from Gazprom than in recent days.

Mueller made another appeal to households and industry to conserve gasoline and avoid rationing.

“The crucial thing is saving gas,” Mueller said. “I would like to hear fewer complaints, but the reports (from industries saying) that we as a sector are contributing to this,” he told the Deutschlandfunk channel.

German industry groups, however, have warned that companies will have no choice but to cut production to achieve greater savings, pointing to the slow pace of approval to replace natural gas with other, dirtier fuels. Read more

Mercedes-Benz (MBGn.DE) Chief executive Ola Kaellenius said a mix of efficiency measures, increasing electricity consumption, lowering temperatures at production facilities and switching to oil could reduce gas consumption by up to 50% in the year, if necessary.

Germany is currently in phase 2 of a three-stage emergency gas plan, with the final phase due to start once rationing can no longer be avoided.

“If you were to ask me if (a gas shortage) is imminent, then I would say that if flows stay at 20% and if we can still add storage facilities in the days and weeks to come, then we don’t have no gas shortage yet, which would be the prerequisite for phase 3,” Mueller said.

($1 = 0.9862 euros)

Join now for FREE unlimited access to Reuters.com

Written by Christoph Steitz and Nina Chestney; edited by Rachel More, Maria Sheahan, Elaine Hardcastle and Tomasz Janowski

Our standards: The Thomson Reuters Trust Principles.

Leave a Comment