Page 14 - EurOil Week 09 2023

EurOil PIPELINES & TRANSPORT EurOil

will have been critical for the outcome of vari- government owns just over 50% of Gazprom, the
ous arbitration processes launched by European assertions of force majeure will be much harder
buyers against Gazprom in Stockholm and other to sustain.”
courts. The buyers in question include Germa- Given the collapse of Russia-West politi-
ny’s Uniper and RWE, France’s Engie and a num- cal ties, it might be considered that arbitration
ber of other major European energy utilities. proceedings will not amount to anything. If
“The standard model for the majority of Rus- Gazprom is unsuccessful in court, it may simply
sia’s gas exports to the EU has been under long- refuse to accept the court’s rulings, it has been
term contracts. In Uniper’s case, some of those argued. WoodMac disagrees.
contracts stretched out to 2035,” Wood Macken- “That view would be a mistake,” WoodMac
zie analyst Ed Crooks said in a blog posted on argues. “Gazprom is still seeking to sign sales
February 24. “In Uniper’s case, some of those agreements with other buyers around the world,
contracts stretched out to 2035. When critics and being seen as a supplier that abides with con-
complained about Europe’s dependence on tract terms, including arbitration decisions in the
imports from Russia, a European could respond event of disputes, is important for that.”
that Gazprom and its predecessors had always Furthermore, the future of the EU-Russia
honoured those supply contracts, through energy relationship is still uncertain, according
the Cold War and the political upheavals that to the consultancy.
followed.” “If, in some very different circumstances,
That all changed in June last year, when Gaz- Gazprom wants to resume its role as a supplier
prom began significantly curtailing supply via to Germany and other Western European coun-
the Nord Stream 1 pipeline, blaming Siemens tries, it will have to resolve any outstanding
for failing to return critical gas compressor units issues from the tribunal,” WoodMac says.
that can be sent overseas for maintenance. By the
end of the summer, Nord Stream 1 was operating Tackling Hersh assumptions
at only a fifth of its capacity, and the pipeline was WoodMac also pushes back against the claims
shut down at the end of August completely, caus- made in Hersh’s report. Hersh argued that “as
ing European gas prices to spike to an all-time long as Europe remained dependent on the
record high. Despite Gazprom’s claims, Western pipelines for cheap natural gas, Washington was
governments accused Russia of weaponising gas afraid that countries like Germany would be
supply in order to force Europe to make conces- reluctant to supply Ukraine with the money and
sions in the Ukrainian crisis. weapons it needed to defeat Russia.”
Uniper has claimed “significant financial That argument is “debatable,” WoodMac says.
damages” as a result of Gazprom’s failure to “At the time of the explosions, no gas was
deliver the contractual gas volumes. At a time flowing through the Nord Stream system, and it
when European spot prices were very high, it was already clear that there was a good chance
had to go to that market to replace the lost Rus- none would ever flow again,” the consultancy
sian supply. It estimated that having to do this says. “European governments have been work-
cost it at least €11.6bn ($12.3bn) by the end of ing hard to reduce their need for Russian gas:
November. Germany, for example, has ordered five floating
The sum will keep growing until the end of regasification and storage units to import LNG.”
2024, according to Uniper, whose CEO Dieter It also notes Berlin’s reaction to Russian sup-
Maubach said that the company was “pursuing ply cuts before Nord Stream 1 was rendered
these legal proceedings [against Gazprom] with inoperable.
all due vigour.” “Russia is no longer a reliable business part-
“We owe this to our shareholders, our ner … it has reduced gas deliveries everywhere
employees and the taxpayers,” he said. in Europe, always referring to technical reasons
While Uniper was the biggest buyer of Gaz- that never existed,” German Chancellor Olaf
prom’s gas in Europe, other customers have also Scholz said back in August. “And that’s why it’s
been hit significantly. Wood Mackenzie esti- important not to walk into Putin’s trap.”
mates that the combined cost of replacing Nord However, WoodMac always cautions that the
Stream 1’s volumes in the second half of last year scenario suggested by Hersh is not impossible,
with spot supplies came to around $40bn. given that Europe will have to wait until at least
2026-27 for the next major wave of global LNG
Force majeure at the heart supply.
Gazprom cited force majeure as the justification “Europe got through the winter of 2022-23
for curtailing supply to its customers over the better than Russia had hoped, thanks in large

summer. That claim was rejected by Uniper and part to the mild weather,” it states. “But it still has
others. With the pipeline now rendered inop- at least three potentially difficult winters ahead
erable by sabotage, the issue of force majeure if the war in Ukraine continues and tensions
is likely to be at the forefront of arbitration between Russia and the EU remain high.”
considerations. But in the longer term, Europe is likely never
“If proof emerges that the US was in fact again to rely on Russia for gas supply as it did
responsible for the attack on Nord Stream, or prior to the war. Russia’s reputation as a reliable
even if the culprit just remains a mystery, then gas supplier has been greatly tarnished, and the
Gazprom’s case will carry much more weight,” rapid development of LNG import infrastruc-
WoodMac notes. “If it emerges incontrovert- ture means LNG has greater than ever capacity
ibly that it was Russia, given that the Russian to compete with Russian gas on price. ™

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