Page 6 - FSUOGM Week 29 2022

FSUOGM COMMENTARY FSUOGM

Nord Stream back up and running,

but flow remains low

The EU is preparing for a long-hard winter without Russian gas in the worst case

EUROPE RUSSIA’S Nord Stream 1 pipeline has finished its claims it has not yet received any official doc-
annual maintenance period on time and is now uments from Siemens relating to the turbine’s
WHAT: back in operation, triggering a modest drop in delivery.
Nord Stream has gas prices. But like before the downtime, the This is all assuming that Russia’s claims about
resumed flow after its pipeline is running at well under its full capacity, technical difficulties at the compressor station
maintenance turnaround. which the Kremlin has blamed on sanctions that are accurate. A number of European leaders
have impeded the return of equipment sent off have accused Russia of political motives for cut-
WHY: for repairs. ting gas flow via Nord Stream. But regardless,
Its capacity remains “Nord Stream AG has successfully completed the matter is somewhat of a red herring. If Nord
constrained, with all planned maintenance works on its twin gas Stream’s capacity really is as constrained as Rus-
Gazprom attributing this pipelines within the scheduled period. Gas trans- sia claims, Gazprom could have easily pumped
to the delay in a turbine mission resumed on July 21, 2022,” the pipeline’s much of the gas via alternative routes, including
delivery. Russian-owned operator said in a statement. the Yamal-Europe pipeline through Poland and
The head of Germany’s network regulator, the transit system of Ukraine. In other words,
WHAT NEXT: Klaus Mueller, said on Twitter that Gazprom there is little reason why Gazprom’s customers
Brussels is preparing for had notified his agency that the pipeline would had to endure cuts in their supply.
full Russian cut-off in gas be running at a mere 30% of its 55 bcm per year The August contract at the Dutch TTF hub
ahead of winter. capacity. dropped to €145 ($148)/MWh when the mar-
Nord Stream serves as a vital route for Sibe- ket opened on July 21, down from a weighted
rian gas headed to Germany and other Euro- average of €155/MWh for the previous session,
pean markets. But Gazprom cut gas flow via the signalling modest relief among traders that Nord
stream by 60% in June, blaming Siemens’ failure Stream came on stream on time. Nevertheless,
to return a turbine that had been shipped off to the sharp reduction in the pipeline’s flow has
Canada for repairs. Canadian sanctions initially Europe spooked. While the EU is so far still on
blocked Siemens from returning the unit, but track to meet its target of filling gas storage facil-
authorities in Ottawa subsequently provided ities to 80% of capacity by October 1 and 90% by
a special exemption to the sanctions regime, November 1, versus 65% at present, the task of
allowing Russia to receive that turbine and oth- stocking up has become much harder in light of
ers sent for repair in the future. recent reductions in Russian gas supply. This has
A number of European countries subse- been compounded by supply outages in Norway
quently reported reductions in their Russian and the US.
gas supply, including Germany and France. And Recognising the severity of the situation, the
several have declared their intention to restore European Commission urged member states on
coal-fired power generation in order to save gas July 20 to slash their gas consumption by 15%
for winter, underpinning climate ambitions. A from August 1, in order to safeguard against the
number of European energy utilities are also at threat of a total cut-off in gas deliveries from
the brink of bankruptcy and in bailout talks with Russia. It wants to see governments switch from
their respective governments, most notably Ger- gas to other fuels, even coal and oil when neces-
many’s Uniper. sary, and limit heating and cooling in buildings,
According to the Moscow-based Kommer- among other measures.
sant newspaper, the turbine was dispatched Whether or not Russia will take such a step
from Canada to Germany via plane on July 17. will depend on developments in Ukraine and
But the newspaper said it would take a further the broader standoff between Moscow and the
five or seven days for the turbine to arrive at the West. But this is a trigger that Gazprom can only
Portovaya compressor station in Russia that han- pull once, at great loss to Moscow’s funds, at a
dles Nord Stream’s gas, and that is assuming that time when it needs them to finance the war in
there are no logistical or customs issues. To rein- the Donbas. While Europe would have to endure
stall and commission the unit will take a further a “long, very hard” winter, as the International
three or four days, implying that Nord Stream Energy Agency (IEA) said, and some economies
will not be capable of running at full capacity could lose as much as 6% of their GDP, accord-
until the end of July or the start of August. ing to the IMF, it may nevertheless harden EU
Further complicating matters, Gazprom resolve to severe all energy ties with Russia. ™

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