August 13, 2022

EU urges members to cut gas amid new Putin warning

  • Nord Stream 1 gas pipeline out of service for maintenance
  • The pipeline is due to resume pumping on Thursday
  • EU says states must act now to reduce gas consumption
  • Germany, others have rationing and other plans in place

BRUSSELS/LONDON, July 20 (Reuters) – The European Union on Wednesday asked member states to cut their gas consumption by 15% until March as part of a contingency plan after President Vladimir Putin warned that Russian supplies sent via the largest gas pipeline to Europe could be further reduced.

Deliveries through the Nord Stream 1 pipeline, which accounts for more than a third of Russian gas exports to the EU, are due to resume on Thursday after a 10-day hiatus for annual maintenance.

But supplies via this route had been reduced even before the disputed maintenance shutdown on the sanctioned parties, and may now be further reduced, while flows via other routes, such as Ukraine, have also decreased since Russia invaded its neighbor in February.

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The disruptions have hampered Europe’s efforts to fill gas reservoirs ahead of winter, raising the risk of rationing and another blow to fragile economic growth if Moscow further restricts flows in retaliation for Western wartime sanctions in Ukraine.

The European Commission has proposed a voluntary target for all EU states to reduce their gas consumption by 15% from August to March, compared to their average consumption during the same period in 2016-2021.

“Russia is blackmailing us. Russia uses energy as a weapon. And so, in any case, whether it is a partial and major cut off of Russian gas or a total cut off of Russian gas , Europe must be ready,” he added. said European Commission President Ursula von der Leyen.

The proposal would allow Brussels to make the target mandatory in the event of a supply emergency, if the EU declares a substantial risk of severe gas shortages. Read more

This decision, which requires the support of EU states, will be discussed on Friday, so that ministers can approve it at an emergency meeting on July 26.

“We believe total disruption is likely and it is particularly likely if we fail to act and make ourselves vulnerable to it,” an EU official said. “If we wait, it will be more expensive and it will mean that we will dance to the tune of Russia.”

EU states are trying to ensure storage facilities are 80% full by November 1, up from around 65% currently, the data shows. https://tmsnrt.rs/3RMqnZg

European politicians say Russia is using technical problems as an excuse to cut deliveries. The Kremlin says Russia remains a reliable energy supplier and has blamed the reduced flows on sanctions.

Two Russian sources familiar with Russia’s export plans said streams via Nord Stream 1 are expected to restart on time on Thursday after being halted on July 11 for annual maintenance.

But they said it would be below its capacity of 160 million cubic meters (mcm) per day.

Gazprom (GAZP.MM), controlled by the Kremlin, reduced its gas exports via road to 40% of its capacity in June, blaming delays in the return of a turbine that Siemens Energy (ENR1n.DE) was servicing in Canada .

ADDITIONAL DISCOUNTS

This sanctioned turbine was reported this week to be on its way back, although Gazprom said on Wednesday it had not received documentation to reinstall it and said the return of the turbine and the maintenance of other equipment was necessary to maintain the pipeline. run safely. Read more

Putin suggested there could be a further cut in supplies via the pipeline that runs under the Baltic Sea to Germany, Europe’s economic powerhouse that has relied heavily on Russian fuel, adding to European concerns in terms of supply. Read more

Gas prices have soared in volatile trade since the Ukraine crisis erupted. The first-month gas contract soared above 160 euros per megawatt-hour (MWh) on Wednesday, 360% higher than a year ago but below its March peak of 335 euros.

Soaring prices prompted utility companies to initiate bankruptcies. In Germany, the government plans to pump billions of euros into the country’s biggest buyer of Russian gas, Uniper (UN01.DE). Read more

Putin said there were five gas pumping units, operated by Siemens Energy at Nord Stream 1 and another unit was out of service due to “chilling lining”.

“There are two machines working there, they pump 60 million cubic meters a day… If one is not returned, there will be one, which is 30 million cubic meters. Is- Gazprom has anything to do with it?” he said.

Putin said another of the gas-pumping turbines was to be sent for maintenance on July 26.

He also said that Gazprom, which has a monopoly on Russian gas exports via pipeline, was not responsible for reducing gas transit capacity through a network of pipelines to Europe.

He blamed Kyiv for closing a route through Ukraine, although Ukrainian authorities blamed the closure on the Russian invasion.

Siemens Energy said maintenance of the Nord Stream 1 turbines would normally be a routine affair. He said he would continue to maintain the equipment under sanctions if possible and necessary, and would work as quickly as possible. Read more

In a pivot to the east, Gazprom said Wednesday that Russian gas supplies to China through its Power of Siberia pipeline hit a new daily record. Moscow has increased its supply capacity in China even as deliveries to Europe dwindle, although the Russian network in the Far East is not connected to the European supply system.

European nations, meanwhile, have been seeking alternative supplies, although the global gas market was tight even before the Ukraine crisis, with fuel demand recovering from the pandemic-induced slowdown.

These efforts have included seeking more gas from suppliers linked to Europe by pipeline, such as Algeria, and building or expanding more liquefied natural gas (LNG) terminals to receive shipments from much further afield, like the United States.

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Reports from Reuters offices; Written by Edmund Blair; Editing by Carmel Crimmins

Our standards: The Thomson Reuters Trust Principles.


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