European gas supply crisis deepens after Russia sanctions

© Reuters. FILE PHOTO: The logo of Gazprom Germania is pictured at its headquarters in Berlin, Germany, on April 1, 2022. REUTERS/Fabrizio Bensch

Joseph Nasr and Marcus Wackert

BERLIN (Reuters) – Pressure on Europe to secure alternative natural gas supplies increased after Moscow imposed sanctions on the European unit of state-owned Gazprom (MCX: ) after Ukraine halted a major gas shipping route on Thursday.

Natural gas prices soared, with the key European benchmark up 12%, as buyers jittered about a growing threat to supply from Europe’s high reliance on Russia.

Moscow has cut off supplies to Bulgaria and Poland as countries race to fill dwindling gas reserves ahead of winter.

Russia imposed sanctions on Wednesday night mainly on Gazprom’s European subsidiaries, including Gazprom Germania, an energy trading, storage and transmission business that Germany put into escrow last month. to ensure supply.

It also imposed sanctions on the owner of the Polish portion of the Yamal-Europe pipeline that transports Russian gas to Europe.

Kremlin spokesman Dmitry Peskov said there was no relationship with the affected companies, nor could they be involved in supplying Russian gas.

The affected entities listed on the Russian government website are mainly located in countries that have imposed sanctions on Russia for the Russian invasion of Ukraine, most of which are members of the European Union.

Germany, Russia’s biggest customer in Europe, said some subsidiaries of Gazprom had not received any gas because of the sanctions.

“Gazprom and its subsidiaries are affected,” German Economy Minister Robert Habeck told the Bundestag lower house. “This means that some subsidiaries are no longer getting gas from Russia. But the market is offering alternatives.”

The list also includes Germany’s largest gas storage facility, Rehden in Lower Saxony, with a capacity of 4 billion cubic meters, operated by Astora, and trader Wingas, which supplies industry and local utilities.

Wingas has said it will continue to operate but will face shortages. Competitors Uniper, VNG or RWE could be potential sources of supply to the market. Russian gas continues to flow into Germany through the Nord Stream 1 pipeline under the Baltic Sea.

Henning Gloystein, director of the Eurasia Group, said other companies such as gas utilities could take over contracts if sanctioned companies were unable to operate, which could involve reaching new terms with Gazprom, including payments.

“This may be Gazprom’s intention here, other than to signal retaliation (against EU sanctions),” he added.

transit

Gazprom said it would no longer be able to export gas through Poland via the Yamal-Europe pipeline after sanctions were imposed on EuRoPol Gaz, which owns the Polish part.

The pipeline, which connects Russian gas fields on the Yamal Peninsula and Western Siberia with Poland and Germany via Belarus, has a capacity of 33 billion cubic meters (bcm), or about one-sixth of Russia’s gas exports to Europe.

However, gas has been flowing east through a pipeline from Germany to Poland for weeks, allowing Poland — which was cut off supplies last month along with Russia and Bulgaria for refusing to comply with the new payment mechanism — to build up inventories.

Export flows into Poland at the Mallnow metering point on the German border were 9,734,151 kilowatt-hours per hour (kWh/h) on Thursday, down from about 10,400,000 kWh/h the previous day, data from the operator of the Gascade pipeline showed.

Germany’s Habeck said Russia’s measures appeared aimed at pushing up prices, but an expected 3 percent drop in Russian gas supplies could be compensated in the market, albeit at a higher cost.

Dutch gas prices at Europe’s benchmark TTF hub rose 20% before closing 12% higher. The benchmark has soared over the past year, adding to the burden on households and businesses.

Although Germany’s gas storage is about 40% full, it is still low at this time of year and stocks need to be built up for winter.

winter

Moscow’s imposition of sanctions comes a day after Ukraine halted a gas transport route, blaming Russian occupation forces for meddling, disrupting exports through Ukraine for the first time since the invasion.

The head of operator GTSOU said the Sokhranovka gas transfer station would not reopen until Kyiv gained full control of its pipeline system, adding that although Gazprom said it was not technically feasible.

Ukraine’s gas transportation system operator said Gazprom booked 65.67 million cubic meters of capacity on Friday through the Sudzha entry point, compared with 53.45 cubic meters on Thursday.

Although the European Commission said the shutdown in Ukraine would not immediately cause gas supply problems, there are concerns over winter, when heating demand will rise and global supply constraints will be affected.

“Current storage levels are sufficient to last through most of 2022, even if flows to Russia will cease immediately barring any unexpected weather events – but the supply outlook for winter 2022 is now much more pessimistic,” said Kaushal, senior analyst Ramesh said. Consulting firm Rystad Energy.

Finnish politicians have been warned that Russia could stop gas supplies to its neighbors on Friday, Iltalehti newspaper reported, citing unnamed sources. Natural gas accounts for about 5% of Finland’s energy consumption.

EU gas companies remain confused about a payments scheme enacted by Moscow in March that the European Commission has said would violate EU sanctions.

Germany’s largest power producer RWE expects Berlin to quickly clarify whether it can pay for Gazprom under Moscow’s proposed scheme, its finance chief said on Thursday, as the deadline looms at the end of the month.

Russia’s request to pay in rubles has been rejected by most European gas buyers because of the details of the process requiring the opening of an account with Gazprombank, adding to concerns about a potential supply disruption and its far-reaching impact on Europe, especially its heavy reliance on Germany. worry. Russian gas.

Source link