Europe braces itself as Nord Stream’s Russian gas link is set to restart

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  • Annual maintenance is scheduled to end at 0600 CET on July 21
  • Different signals of resumption
  • Extension may interfere with gas storage replenishment

LONDON, July 21 (Reuters) – Europe is on the verge of restarting the Nord Stream 1 gas pipeline from Russia after annual maintenance is set to end on Thursday, with governments bracing for possible further supply cuts.

A planned outage on the largest single pipeline carrying Russian gas to Germany started on July 11 and is expected to end at 0600 CET (0400 GMT) on July 21. It transports 55 billion cubic meters (bcm) of gas per year under the Baltic Sea.

If the outage is prolonged, the operator Nord Stream AG should make it clear on its website, where the flow section would indicate either a resumption or zero gas.

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In the last two years, Nord Stream 1 has resumed gas deliveries on time after the maintenance that takes place every summer.

In July, the delay of a turbine being serviced in Canada and Gazprom’s declaration of force majeure to European customers, meaning it cannot guarantee delivery due to extraordinary circumstances, have raised concerns of a prolonged outage . Read more

Two sources familiar with Gazprom’s plans told Reuters on Tuesday that flows are likely to restart at pre-maintenance levels of 40% of the pipeline’s capacity. Read more

The head of Germany’s energy regulator said on Wednesday that he expected the pipeline to resume at about 30% of capacity based on nominations or requests for gas at Lubmin, where Nord Stream 1 lands in Germany. Read more

There is still time for these nominations to change before scheduled maintenance ends.

While better than no resumption, gas flows with reduced capacity would still have the effect of disrupting Europe’s storage plans and exacerbating a gas crisis that has prompted emergency measures by governments and painfully high bills for consumers.

TURBINE FLASH POINT

As the West accuses Moscow of using its energy resources as a weapon, some European governments, such as Germany, have said any turbine delay could give Russia a pretext to extend maintenance.

Canada has said it has issued a permit for the turbine to be returned, but it is not known when it will reach the Nord Stream pipeline.

Russian President Vladimir Putin has also said it was not clear in what condition the turbine would be returned after the repairs in Canada, adding to uncertainty about the pipeline’s restart. Read more

Russia insists it is a reliable supplier and rejects Western accusations that it uses energy to blackmail Europe. It also accuses the West, in its support for Ukraine, of waging economic warfare against Moscow.

The Russian gas giant Gazprom (GAZP.MM) has said the turbine is necessary for the safety of Nord Stream 1 and has said it has not received documentation from Siemens Energy (ENR1n.DE)who maintained the turbine, that it must be reinstalled. Read more

Gazprom has not commented on its declaration of force majeure, retroactive to June 14, when Russia reduced gas flows to 40% of capacity, citing the missing turbine. Read more

Traders, who spoke on condition of anonymity, saw the statement as an attempt to protect Gazprom from any lawsuits over breach of contract.

Along with analysts and governments, they also braced for months of tension and possibly fluctuating gas flows.

“With European leaders determined to increase sanctions against the Kremlin, the likelihood has increased that the Russian government will announce the next step in further cutting gas flows to Europe in retaliation,” Hans van Cleef, senior energy economist at ABN Amro said.

Other analysts also expect flows to be reduced further in the coming months, but note that Russia needs income as much as Europe needs gas.

“We believe the most likely scenario is that Nord Stream flows restart and move back to capacity once Gazprom receives the gas turbine from Siemens, but there remains the risk of further reductions in the following weeks or months,” said analysts at investment bank Jefferies in a note. .

“We believe that Russia’s objective is to prevent Europe from building gas stocks ahead of winter, keep gas prices high, maximize economic damage and preserve leverage. The latter will not be achieved if volumes are reduced to zero,” they added.

According to the Finland-based research organization Center for Research and Clean Air, Russia earned 24 billion euros ($24.6 billion) in gas revenues from pipelines in the first 100 days of the Ukraine war (February 24-June 3).

The financial effort is also high for Europe.

About 32% of Europe’s gas consumption comes from Russia, of which 90% is through pipelines. Russia is also heavily dependent on the European market, with 82% of its pipeline gas exports going to the continent, Barclays analysts said.

The European Commission has said that a complete disruption of Russian gas supplies to Europe, if combined with a cold winter, could reduce the EU’s average gross domestic product by up to 1.5% if countries do not prepare in advance.

European Commission President Ursula von der Leyen said on Wednesday that a full cut was “a likely scenario” as the EU chief proposed a voluntary target for member states to cut gas consumption by 15% by March.

($1 = 0.9754 euros)

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Reporting by Nina Chestney; additional reporting by Kate Abnett in Brussels, Marwa Rashad in London and Christoph Steitz in Frankfurt and Reuters offices; Editing by Veronica Brown and Barbara Lewis

Our standards: Thomson Reuters Trust Principles.

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