Page 11 - FSUOGM Week 30 2022

FSUOGM PIPELINES & TRANSPORT FSUOGM

when the heating season started with less than was sent to Canada for repairs in June will
80%. Europe has filled its tanks faster than usual return to Russia. As of July 25, the unit was still
this year thanks to record LNG imports. in Lübeck, Germany, but it still has not been sent
Ukraine has the most to do with the lowest on to Russia, as Gazprom is quibbling about the
storage levels in Europe of only 22.9% and also paperwork.
has by far the largest storage facilities in Europe At first, Gazprom claimed that the turbine
as the traditional warehouse of winter gas sup- manufacturer Siemens did not submit the docu-
plies. In a controversial move, Ukraine’s govern- ments necessary for transportation, but on July
ment has ordered the state-owned gas company 25 it said that the documents have arrived, but
Naftogaz to ask its bondholders to voluntarily "do not remove the previously identified risks,
delay coupon payments to free up cash to buy and raise additional questions."
more gas. The company needs to buy an esti- Siemens says that all the necessary docu-
mated 5 bcm of gas worth some $7.8bn and it ments were submitted a week ago, but there are
remains unclear where Naftogaz will get both the no documents for import to Russia, which Gaz-
money and the gas from. prom must submit and has not.
Even if the 80% goal is reached by October After Gazprom's announcement, gas prices
1 and the second goal of 90% by November 1, in Europe spiked by 6% and are approaching
Europe will still need more imports from Rus- $1,800 per thousand cubic metres.
sia over the rest of winter as only Slovakia and Experts worry that an extra cold winter this
Austria have enough gas storage capacity to get year would only exacerbate the problems. And
through the whole winter without more imports. a combined cold European and Asian winter
The IMF warned that in a worst-case scenario would make things even more difficult by draw-
of a total cut-off of Russian gas the most exposed ing off LNG supplies to Asia, which is heavily
economies could see GDP contract by up to 6% dependent on LNG for heating and power.
and key markets like Germany and Italy would In addition to the reductions in gas flow
see a contraction of between 2% and 3%. Most of through the Nord Stream 1 pipeline to Germany
Europe is headed into recession by the end of this and northern Europe, Russia has already cut off
year anyway due to multiple problems caused by gas flows to Poland, Bulgaria, Denmark, Fin-
Russia’s war in Ukraine and looming stagflation. land and Dutch firm Gasterra and Shell for its
The lack of gas and sky high prices that have German contracts, after they all rejected the gas-
risen to $1,800 per thousand cubic metres – ten for-rubles scheme introduced by presidential
times the normal level – have already done a decree in May, although the combined volumes
lot of damage. Germany’s biggest energy com- to these countries are a relatively small share of
pany Uniper, and the biggest importer of Rus- total imports to Europe.
sian gas in Europe, has already been forced to The expanding gas war is worrying European
ask the German government for a bailout, as politicians as Russia increasingly uses its tools to
what it can charge consumers is fixed by law, exert pressure on the West to make more sanc-
although that may change if Russia continues to tions concessions. The Istanbul grain deal signed
restrict gas flows. The French government has on July 22 that will allow Ukraine to expand
also announced plans to nationalise its energy grain exports was immediately threatened by
champion Gas de France (GdF), which is having rocket attacks on the port the next day, which
similar problems, by buying back the 16% of the sent wheat futures spiking. A key part of the
company it does not already control for €8bn. deal was Russia insisted on, and got, concessions
on sanctions on its own grain exports, a major
Reduced flows earner for the budget. It looks like the Kremlin
At 20% of capacity, or 33mn cubic metres per is squeezing gas supplies with the same goal in
day, Europe will be able to refill storage to only mind and gas supplies is a major lever for the
75%-80% ahead of winter, Wood Mackenzie Kremlin.
consultancy told Reuters. For the previous “If we don’t get the gas turbine, then we won’t
month and a half since June 15 (excluding the get any more gas, and then we won’t be able to
scheduled 10-day maintenance break), Nord provide any support for Ukraine at all, because
Stream has operated at 40% capacity, or 66 then we’ll be busy with popular uprisings,” Ger-
mcm per day. Nord Stream 1's nameplate ca- man Foreign Minister Annalena Baerbock said
pacity is around 165 mcm per day. in a TV interview this week.
"As a result, Europe is likely to get through the Analysts say that a complete cut-off of gas
heating season with only 20% gas in store at the during the autumn is unlikely, as once the gas
end of March – a very low level," said Kateryna stops flowing completely Russia precipitates a
Filippenko, principal analyst, Global Gas Sup- full-blown energy crisis, loses its European gas
ply, at Wood Mackenzie. In 2021/2022 Europe market forever and ends the revenue stream it
finished the heating season with tank storage at currently earns from gas that is also bleeding the
26% – the lowest level in years. European exchequers of money. More likely is
Putin warned that at the end of June one more that Russia will maintain gas flows at less than
unit might be sent for repair, and if the first tur- sufficient levels to keep the pressure on Brussels
bine arrives by that time, “well, two will work. and to keep gas prices at crisis levels, reserving
And if it doesn’t come, there will be one – it will the threat of a total shutdown for the winter and
be only 30 mcm per day.” as leverage during talks to possibly end the war
It is still unclear when the first turbine that in Ukraine. ™

Week 30 28•July•2022 www. NEWSBASE .com P11