Russia deepens energy pressures in Europe with new gas moratorium

Russia deepens energy pressures in Europe with new gas moratorium

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  • Maintenance outage on Nord Stream 1
  • No streams to Germany 0100 GMT, August 31 – 0100 GMT, September 3
  • European governments fear that Moscow may extend the outage
  • German regulator: We save gas, we must continue
  • Siemens Energy: Not involved in maintenance work

FRANKFURT/LONDON (Reuters) – Russia halted gas supplies through Europe’s main supply route on Wednesday, intensifying an economic battle between Moscow and Brussels and raising the prospect of a recession and energy rationing in some of the region’s richest countries.

European governments fear Moscow will extend the outage in response to Western sanctions imposed after the invasion of Ukraine and have accused Russia of using energy supplies as a “weapon of war”. Moscow denies this and has talked about technical reasons for reducing supplies.

Russian energy giant Gazprom (GAZP.MM) said the Nord Stream 1 pipeline, the largest pipeline that brings gas to its biggest customer Germany, will be out for maintenance from 0100 GMT on August 31 until 0100 GMT on September 3. read more

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The head of the German network regulator said Germany would be able to handle a three-day outage as long as flows resumed on Saturday.

“I suppose we’ll be able to deal with it,” Klaus Muller told Reuters Television in an interview. “I’m confident Russia will be back to at least 20% as of Saturday, but no one can really say.”

More restrictions on European gas supplies would deepen an energy crisis that has already caused wholesale gas prices to rise 400% since last August, putting pressure on consumers and businesses and forcing governments to spend billions to ease the burden. Read more

In Germany, inflation rose to its highest level in nearly 50 years in August and consumer confidence soured as households prepared for higher energy bills. Read more

less supply

In contrast to last month’s 10-day maintenance of Nord Stream 1, the latest work was announced less than two weeks in advance and is being performed by Gazprom rather than its operator.

Moscow, which cut supplies through the pipeline to 40% of capacity in June and 20% in July, blames maintenance issues and penalties it says prevent the return and installation of equipment.

The Interfax news agency quoted Kremlin spokesman Dmitry Peskov as saying on Wednesday that Russia was still committed to its gas supply commitments, but was unable to fulfill them due to sanctions.

Gazprom said the latest shutdown was necessary to carry out maintenance on the pipeline’s only remaining compressor at Russia’s Portovaya plant, saying the work would be carried out jointly with Siemens specialists.

Pipes are photographed at the land landing facilities of the “Nord Stream 1” gas pipeline in Lubmen, Germany, March 8, 2022. REUTERS/Hannibal Hanschke

Siemens Energy (ENR1n.DE), which has carried out maintenance work on compressors and turbines at the plant in the past, said on Wednesday it was not involved in the maintenance but was ready to advise Gazprom if needed. Read more

Russia has also halted supplies to Bulgaria, Denmark, Finland, the Netherlands and Poland and reduced flows through other pipelines since launching what Moscow calls its “special military operation” in Ukraine. Read more

Gazprom said on Tuesday it would also suspend gas deliveries to its French contractor over a payments dispute that France’s energy minister called an excuse, but added that the country had expected a loss of supplies. Read more

German Economy Minister Robert Habeck, on a mission to replace Russian gas imports by mid-2024, said earlier this month that Nord Stream 1 is “fully operational” and there are no technical problems as Moscow claims.

element of surprise

Declining flows through Nord Stream have complicated efforts across Europe to provide enough gas to last through the winter months, when governments fear Russia will halt flows altogether.

“It’s a miracle that gas filling levels in Germany have continued to rise though,” Commerzbank analysts wrote, noting that the country has so far been able to buy enough at higher prices elsewhere.

Meanwhile, some Europeans are voluntarily cutting their energy consumption, including limiting their use of electrical appliances and showering at work to save money as companies prepare for possible rationing. Read more

With storage tanks filling 83.65%, Germany is already close to meeting its target of 85% on October 1, but warned that reaching 95% by November 1 would be a stretch unless companies and households cut consumption.

The European Union as a whole has reached 80.17% of its storage capacity, already exceeding the 80% target set on October 1, when the heating season begins on the continent.

Analysts at Goldman Sachs said their base scenario is that the recent Nord Stream 1 blackout will not be extended.

“If that were to happen, there would be no element of surprise and revenue declines, while lower inflows and an episodic drop to zero have the potential to keep market volatility and political pressure on Europe higher,” they said.

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Reporting by Nina Chestney and Christoph Stitz; Additional reporting by Matthias Inverardi, Barat Govind Gautam and Eileen Suring; Editing by Veronica Brown, Carmel Kremens, Lincoln Fest and Tomasz Janowski

Our Standards: Thomson Reuters Trust Principles.

Nina Chestney

Thomson Reuters

He oversees and coordinates Europe, Middle East and Africa coverage of the energy, gas, LNG, coal and carbon markets and has 20 years of experience in journalism. He writes about those markets as well as climate change, climate science, energy transition, renewable energy, and investment.

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