Russia cuts gas flows further as Europe pushes for savings

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Pipes at the landing facilities of the Nord Stream 1 gas pipeline are pictured in Lubmin, Germany, March 8, 2022. REUTERS/Hannibal Hanschke/

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BERLIN/FRANKFURT, July 27 (Reuters) – Russia delivered less gas to Europe on Wednesday in a further escalation of an energy stand-off between Moscow and the European Union that will make it harder and more expensive for the bloc to stock up ahead of winter’s firing season.

The cut in supplies, marked by Gazprom (GAZP.MM) earlier this week reduced the capacity of the Nord Stream 1 pipeline – the main delivery route to Europe for Russian gas – to just a fifth of its total capacity.

Nord Stream 1 accounts for about a third of all Russian gas exports to Europe.

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On Tuesday, EU countries approved a weakened emergency plan to curb gas demand after reaching compromise deals to limit cuts for some countries, hoping lower consumption will ease the impact if Moscow cuts supplies altogether. Read more

The plan highlights fears that countries will not be able to meet targets to replenish stocks and keep their citizens warm in the winter months, and that Europe’s fragile economic growth could take another hit if gas is rationed. Read more

Analysts at the Royal Bank of Canada said the plan could help Europe get through the winter provided gas flows from Russia are at 20-50% capacity, but warned against “market complacency, European politicians have now resolved the issue of Russian gas dependence .”

While Moscow has blamed various technical problems for the supply cuts, Brussels has accused Russia of using energy as a weapon to blackmail the bloc and retaliate against Western sanctions over its invasion of Ukraine.

Kremlin spokesman Dmitry Peskov said Gazprom was supplying as much gas to Europe as possible, adding that sanctions-driven technical problems with equipment prevented it from exporting more. Read more

‘SAVE GAS’

On Wednesday, physical flows via Nord Stream 1 fell to 14.4 million kilowatt-hours per hour (kWh/h) between 1000-1100 GMT from around 28 million kWh/ha a day earlier, already only 40% of normal capacity. The drop comes less than a week after the pipeline restarted after a scheduled 10-day maintenance period.

European politicians have repeatedly warned that Russia could cut off gas flows completely this winter, which would send Germany into recession and push up consumer and industrial prices even more.

The Dutch wholesale gas price for August, the European benchmark, rose 9% on Wednesday to 205 euros per megawatt hour, an increase of about 412% compared to a year ago.

German Finance Minister Christian Lindner said he was open to the use of nuclear power to avoid electricity shortages. Read more

Germany has said it may extend the life of the three remaining nuclear power plants, which account for 6% of the country’s total energy mix, in the face of a possible cut-off of Russian gas.

Klaus Mueller, head of Germany’s grid regulator, said the country could still avoid a gas shortage that would prompt its rationing.

Germany, Europe’s top economy and its largest importer of Russian gas, has been particularly hard hit by supply cuts since mid-June, with its gas importer Uniper (UN01.DE) as a result, a state bailout of 15 billion euros ($15.21 billion) is required.

Uniper and Italy’s Eni (ENI.MI) both said they were receiving less gas from Gazprom than in recent days.

Mueller issued another plea to households and industry to conserve gas and avoid rationing.

“The bottom line is saving gas,” Mueller said. “I would like to hear fewer complaints, but reports (from industries that say) we as a sector are contributing to this,” he told broadcaster Deutschlandfunk.

However, German industry groups warned that companies have no choice but to cut production to achieve greater savings, pointing to slow approval to replace natural gas with other, more polluting fuels. Read more

Mercedes-Benz (MBGn.DE) CEO Ola Kaellenius said a mix of efficiency measures, increased electricity consumption, lowering temperatures in production facilities and switching to oil could lower gas consumption by up to 50% within the year, if needed.

Germany is currently in phase 2 of a three-stage emergency gas plan, with the final phase due to start when rationing can no longer be avoided.

“If you asked me if it (a gas shortage) is imminent, I would say if the flow remains at 20% and if we can still add storage facilities in the coming days and weeks, then we do not yet have a physical gas shortage , which would be the prerequisite for Phase 3,” Mueller said.

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Written by Christoph Steitz and Nina Chestney; editing by Rachel More, Maria Sheahan, Elaine Hardcastle and Tomasz Janowski

Our standards: Thomson Reuters Trust Principles.

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