Page 4 - FSUOGM Week 25 2022

FSUOGM COMMENTARY FSUOGM

Russia-EU gas crisis enters next

phase as Germany, Italy and France

all report cuts in supply

Whether technical or political in nature, Russia has steeply cut gas flow via

the Nord Stream 1 pipeline

RUSSIA THE crisis in the EU-Russia gas relationship has has dismissed the disruption at Nord Stream 1
taken another turn for the worse, with Germany, as politically motivated.
WHAT: Italy and France all reporting cuts in supply after “Russia’s reason [for reducing gas supplies]
Germany, Italy and France all three countries backed Ukraine’s bid for EU is just a pretext,” German Vice-Chancellor
have reported cuts in candidate status. Robert Habeck said. “Their strategy is obvi-
Russian gas flow as they The leaders of Germany, France and Italy, as ously to unsettle [people] and drive up prices.”
endorse Ukraine’s bid for well as Romania, threw their support behind Germany’s reliance on Russian gas has fallen in
EU candidate status. providing immediate EU candidate status for recent months, partly through its own efforts to
Ukraine and Moldova in a joint news conference diversify supply but more significantly because
WHY: in Kyiv on June 16, laying to rest any doubts over Gazprom has cut off some buyers, including
Gazprom claims that their stance. In the run-up to that announce- Poland in April and Finland in May. But Ger-
technical difficulties ment, Russia curtailed gas supply to Germany, many still sources approximately 35% of its gas
are to blame for the cut France and Italy, forcing the three countries to from Russia, and natural gas has come to play
in deliveries via Nord put their energy systems on high alert. an increasingly large role in its energy mix, to
Stream 1. The curtailment in Russian supply has also support intermittent renewables as it has stead-
driven up already sky-high gas prices in Europe. ily phased out nuclear and coal-fired capacity in
WHAT NEXT: The July contract at the Dutch TTF hub has risen recent years.
Germany is most more than 50% over the past week. On June 20 The German government announced on June
exposed of the three to it gained nearly 5% in early trading, coming to 19 additional measures to boost gas storage lev-
the disruption, which €124 ($131)/MWh. Exacerbating the market’s els ahead of the next winter heating season, amid
explains why it has tightness, the 15mn tonne per year (tpy) Free- rising fears that Moscow could cut off gas supply
resorted to resuming port LNG terminal in Texas suffered an explo- to the country completely. Its economy ministry
coal-fired power sion on June 8, taking out of action what has said the new measures would include increased
generation. been the source of 10% of Europe’s LNG imports reliance on coal-fired power plants, as well as the
in recent weeks. introduction of an auction system starting in the
coming weeks that would provide incentives
Germany to industry to consume less. The government
On June 14, Gazprom said it was reducing gas is also providing a €15bn ($16bn) credit line to
supply via Nord Stream 1 to 100mn cubic me- Germany’s gas market operator via state lender
tres per day, down from a previous plan of 167 KfW, to help it stock up on gas faster, according
mcm per day, because of technical difficulties to Reuters.
at the Portovaya compressor station that han- Germany’s gas storage facilities are cur-
dles the pipeline’s gas. The company followed rently under 58% full, meaning that the country
this up with an announcement on June 15 that still has considerably further to go to reach the
it was curtailing output at Portovaya further to EU-mandated target of having storage utilisation
67 mcm per day, representing a 60% reduction at 80% by November 1, in preparation for winter.
versus the original plan. The country has had to fill up its facilities faster
Specifically, Gazprom pointed to Siemens’ than many of its neighbours in recent months,
failure to return on time turbines to Portovaya as several of them until recently owned by Gaz-
that had been sent off to repair. The German prom were left depleted at the start of last winter.
engineering group confirmed to Reuters that
it had been unable to do this because of Cana- Italy and France
dian sanctions. Turbines represent a particular Italy is likewise significantly reliant on Russia
vulnerability for Russia’s energy system, as it is for its energy needs. The country covers around
heavily reliant on foreign equipment and ser- 17% of its gas demand with Gazprom supply,
vices here. However, Germany’s government and gas plays an even greater role in its ener-

P4 www. NEWSBASE .com Week 25 22•June•2022