European gas prices soar after Moscow imposes sanctions on EU energy firms

Russia’s state-owned gas supplier said it would cut exports to Europe through a major pipeline, sending prices soaring and bolstering President Vladimir Putin’s willingness to use energy as a weapon against the European Union.

Gazprom said it would no longer be possible for gas to pass through the Yamal pipeline after the Kremlin imposed sanctions on European gas companies late on Wednesday. The sanctioned companies include some of its own former units as well as Yamal’s owner Europol Gaz. The pipeline runs from Russia to Germany via Poland.

“A ban on transactions and payments to sanctioned entities has been implemented,” Gazprom said in a statement. “For Gazprom, this means a ban on the use of gas pipelines owned by Europol Gaz to transport Russian gas. to Poland.”

The move cut off Russian gas from a second pipeline to Europe for several days and underscored Moscow’s desire to halt gas supplies to Europe by warning.

“Overall, the situation is escalating,” said German Economy Minister Robert Habeck. “The fact that Russia is using energy as a weapon has once again become apparent.”

The retaliation pushed up natural gas prices. Future contracts linked to TTF, the benchmark for European wholesale gas prices, rose about 13 percent on Thursday to about 106 euros a megawatt-hour, more than four times the level of a year ago.

Prices have risen this week from lows of around 90 euros per megawatt-hour as Russia faces new threats to natural gas supplies to the African continent.

Electricity prices have also risen. The price of electricity in Germany is set to hit its highest level this year next year, at more than 230 euros per megawatt-hour, according to Refinitiv data.

Ukrainian pipeline operators on Wednesday shut down the flow of one of the two main pipelines that transport Russian gas through the country to Europe, citing the intervention of Russian occupation forces.

While very little gas has passed through the Yamal-Europe pipeline in recent weeks, the pipeline will be relied upon when gas demand rises.

Sanctions on Europol Gaz could pose problems for Germany’s energy security next winter when gas demand picks up, said Tom Marzec-Manser, head of gas analysis at commodity data firm ICIS.

The sanctions from Moscow said they were in response to a series of Western sanctions and also bar Russian entities from selling gas or doing deals with Gazprom Germania, a gas trading and storage company that was acquired by the German government last month.

Gazprom Germania’s assets include Germany’s largest gas storage facility, Rehden, which accounts for about one-fifth of the country’s total capacity, and major German gas distributors Wingas, WIEH and WIEE, which buy supplies from Gazprom.

Germany acknowledges that Russia’s actions have had an impact. Habeck said the supply was cut by 10 million cubic meters per day, equivalent to 3 percent of Russia’s annual supply of natural gas. But he insisted it was “controllable”.

“These quantities can be sourced in the market from other sources, and it is our task to buy these quantities,” he said. “The German government will do everything in its power to stabilize Gazprom Germania.”

He said such a situation would not require a gas supply alarm to be triggered, adding that Germany was “prepared for this and all other possible scenarios”.

Moscow’s sanctions could cut European gas supplies by 13 billion cubic meters, according to models from the Oxford Institute for Energy Research. Russia supplied the EU with 155 cubic centimeters of gas last year, about 40 percent of its demand.

Michael Müller, chief executive of RWE, one of Germany’s biggest gas buyers, said it was assessing the impact of the sanctions, but believed the Russians “would not necessarily fill up the gas storage owned by Gazprom Germania anyway. facility”. The facilities were depleted before the war began after Russia withheld supplies during the winter.

The European Commission said it was “analysing Russia’s decision to impose sanctions on certain EU companies and the impact on the security of EU gas supplies”.

It said the move underscored the need to reduce energy dependence on Russia. It will unveil a proposal to increase alternative supplies, renewable energy and hydrogen on May 18.

Gas traders have been focusing for weeks on a new ruble payment mechanism demanded by Russia, which has left Poland and Bulgaria cut off from Russian gas and could flare up again in late May when more European buyers are due to pay.

Additional reporting by Andy Bounds in Brussels

Source link