generalspeaking: Moscow Wringing Out Europe's Winter Gas Shortages Fears

Wednesday, July 27, 2022

Moscow Wringing Out Europe's Winter Gas Shortages Fears

"It puts stress on Europe for gas curtailments."
"If there are no effective gas and electricity demand savings implemented now there will be inevitable curtailments for industries in the case of [a] cold winter."
Mauro Chavez Rodriguez, research director, European gas & LNG, Wood Mackenzie Ltd.

"[The government is] monitoring the situation very closely [together with the Federal Network Agency]."
"According to our information, there is no technical reason for a reduction in deliveries [of gas]."
German Economy Ministry

"[Russia is] not interested [in a complete cut-off of its gas deliveries to Europe]."
"[However], if Europe continues its course of absolutely recklessly imposing sanctions and restrictions that are hitting it, the situation may change."
Kremlin spokesman Dmitry Peskov

A view shows a screen with the logo of Gazprom at the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg, Russia June 17, 2022. REUTERS/Anton Vaganov/

Less than a week after returning the Nord Stream pipeline link from maintenance, Russia has announced plans to curb natural gas flows. A statement that was anticipated, but which still shocked European energy markets, escalating concerns over a critical supply shortage on the continent for the coming winter.

The link to Germany will see cut shipments by Gazprom PJSC to roughly 20 percent of capacity, from 7:00 a.m. Moscow time Wednesday, warned a statement from the Russian gas giant. Another gas turbine critical for supply is due for maintenance, scheduled to be taken out of service.

Of the remaining gas conduit from Russia to the European Union, gas had been flowing through the pipeline at about 40 percent of capacity since its return on line after ten days of maintenance, from July21. Europe is currently in the grip of its most serious energy crisis in decades, with governments desperate to fill gas storage sites before winter's onset. The broader economy has realized supply shortages, adding to concerns over a potential recession, raising the risk of gas rationing.

Canada had granted an exemption, despite sanctions, for the release and delivery of a Montreal Siemens turbine maintenance schedule. Last week ,Vladimir Putin warned Nord Stream flows could fall again should a disagreement over its turbines which pump gas through the network fail to resolve. Manufactured by Siemens Energy AG, the units are required to be shipped to Canada for maintenance where sanctions-related delays threaten expeditious returns.

A turbine recently serviced remains en route to Russia from Germany amidst delays related to paperwork. Once that component is returned it would allow flows to increase to 40 percent, according to Mr. Putin. Leaving, at present, one turbine only in working condition based on Gazprom's statements. Under normal conditions the station requires six major turbines; the one en route from Canada represents only a second one in operational mode.

Given recent comments from Russia, a Nord Stream flow reduction "was unfortunately expected" according to the head of gas analytics at ICIS. "The key question now is how long will this reduction to just 20 percent of the pipe's capacity actually last", noted Tom Marzec-Manser.

It has been months that Moscow has curbed European Union gas shipments, an obvious weaponization of energy, resulting in high regional tensions as a reflection of Russia's invasion of Ukraine. The EU is focused on whatever inadequate gas it receives from Russia to fill its winter stockpiles. Every market in Europe is consumed about gas shortages. The European Commission has called on all member-states to take part in the effort to save gas.

Nord Stream supplies were cut by Gazprom in two steps a month earlier, citing issues with turbines at the Porovaya compressor station. Issues, according to the company, caused by delays in repairs by Siemens, related to international sanctions. The turbine shipped from Canada remains in Germany resulting from paperwork delays by Gazprom itself needing to provide the required documents to Siemens.