Empty pipes: how the suspension of the Nord Stream operation can affect the cost of gas in Europe

On Monday, July 11, Nord Stream AG, the operator of Nord Stream, is suspending gas pumping through both lines of the pipeline for scheduled preventive maintenance.

Maintenance, which includes testing of mechanical components and automation systems, should last until July 21.

The intention to temporarily turn off Nord Stream was officially announced at the beginning of the month.

As explained in Nord Stream AG, preventive measures are necessary to ensure efficient, safe and reliable operation of the gas pipeline.

“The schedule and work plan were agreed in advance with Nord Stream AG's upstream and downstream gas transportation partners.

Information about the work was disclosed in a timely manner in accordance with the requirements of Regulation (EU) No. 1227/2011,” the company said in a press release.

Turbine of Discord

Recall that gas via Nord Stream is supplied directly from Russia to Germany, from where it is then transported to other EU countries.

Both lines of the pipeline run along the bottom of the Baltic Sea and allow the pumping of 55 billion cubic meters.

m of fuel per year.

However, in mid-June 2022, supplies through Nord Stream for technical reasons decreased by almost 2.5 times - from the planned 167 million cubic meters.

m per day to 67 million. Gazprom was forced to reduce the pumping of raw materials through the pipeline after the German company Siemens did not return one of the gas turbine engines from repair.

According to the head of Gazprom, Alexei Miller, Siemens has only one plant for maintenance of gas pumping units, which is located in Canada.

Ottawa, in turn, did not return the already repaired equipment due to sanctions against Russia.

“This is not a sanction confusion, not someone’s absolutely purposeful decision ... The engine is at the factory (in Canada. -

).

The engine cannot be taken from the Siemens factory.

And other engines are suitable and have already come to the point when it is necessary to make major repairs.

And they can't be sent to Canada.

And they can’t be sent to any other plant either ... Of course, Gazprom is reducing the volume of gas supplies to Europe, ”Miller explained during a speech at the St. Petersburg International Economic Forum.

Against the backdrop of reduced pumping through Nord Stream, the cost of gas on the European market began to rise sharply and in early July briefly exceeded €187 per MWh, or about $1,950 per 1,000 cubic meters.

m. The value was the highest in the last four months.

It is curious that the German authorities initially considered the reduction in gas pipeline deliveries to be politically motivated.

For example, the Minister of Economy and Climate Protection of Germany, Robert Habek, called all the technical reasons indicated by Gazprom as far-fetched and accused Russia of trying to “inflate prices”.

A similar position was expressed by German Chancellor Olaf Scholz.

Later, however, it became known that Berlin was negotiating with Ottawa regarding the return of the turbine.

On July 7, Robert Habeck urged Canada to resolve the issue with the delivery of the engine, as Germany needs Nord Stream's capacity to fill gas storage facilities.

“I am ready to be the first to defend the adoption of another tough package of EU sanctions, but tough restrictions mean that they should harm Russia and Putin more, and not our economy ... If this is a legal issue for Canada, then I want to note that I am not asking them deliver it (turbine. -

) to Russia, deliver it to Germany, ”Khabek said in an interview with Bloomberg.

• German Vice Chancellor Robert Habeck

• Gettyimages.ru

In response to the request of the German leadership, the Canadian authorities nevertheless approved the return of the German gas turbine engine, which was announced on July 10 by the country's Minister of Natural Resources, Jonathan Wilkinson.

According to him, for this, Ottawa issued a special temporary permit, partially lifting restrictions against the Russian oil and gas industry.

“Without the necessary supplies of natural gas, the German economy will face very serious difficulties, and the Germans themselves risk being unable to heat their homes as winter approaches,” Wilkinson explained on Twitter.

However, the initiative of Canada was strongly reacted in Kyiv.

So, the Ministry of Energy of Ukraine stated that they were disappointed with the decision of Ottawa.

The ministry called the targeted lifting of anti-Russian sanctions a "dangerous precedent."

“The Canadian-German agreement and the decision announced on its basis is an adjustment of the sanctions regime to the whims of Russia ... We call on the Canadian government to cancel this decision, as well as ensure the integrity of the sanctions regime,” the agency said in a statement.

In alarm mode

The situation is developing against the backdrop of the fact that at the end of June the German authorities announced a state of alarm as part of an emergency plan for gas due to a reduction in supplies from Russia.

And in recent weeks, Berlin has been actively urging citizens and businesses to save energy consumption so that the country can survive next winter.

At the same time, the Federal Network Agency of Germany fears that the repair time for Nord Stream may increase.

“We are wondering if this maintenance will become a long-term political maintenance… If, as a result of the work, the gas flow from Russia is reduced for a longer period for political reasons, then we will have to talk more seriously about savings,” said Klaus Müller, head of the agency, in an interview with a media group funke.

• Gettyimages.ru

The Kremlin, meanwhile, has dismissed any allegations that Russia is using energy resources as a "weapon of political pressure."

As Presidential Press Secretary Dmitry Peskov said on July 8, Moscow is consistently fulfilling its obligations and is able to guarantee Europe's energy security.

“There is a certain routine work on gas pipelines, these works are carried out every year, no one invented any new types of work.

If this turbine arrives after repair, yes, this will increase the volume (gas supplies. -

),” the Kremlin representative emphasized.

Nevertheless, against the backdrop of a complete suspension of gas transportation through Nord Stream over the next ten days, Western officials may think about the advisability of further increasing sanctions pressure on Moscow.

Artyom Deev, head of the analytical department at AMarkets, shared this opinion in a conversation with RT.

“Even the scheduled suspension of the pipeline for ten days made traders nervous and bought raw materials for the future, which could provoke an increase in gas prices up to $2,500 per 1,000 cubic meters.

m soon.

At the same time, if the turbine is never returned, the prospects for a long-term halt in gas supplies from the Russian Federation to Europe are real.

In this scenario, we can see quotes above $3,000 per thousand cubic meters,” the analyst suggested.

"reminds me of communism"

In the context of the growing shortage of gas, European business has already begun to suffer image and financial losses.

For example, in early July, the international agency S&P placed the rating of Uniper, one of the largest energy companies in Germany, on review with a negative outlook.

The concern is forced to replace the missing stocks of raw materials at high market prices after Gazprom reduced supplies.

“The rise in energy prices has already led to an increase in the costs of producers by almost two times.

In May, the industrial price index in Germany rose by almost 34%, which was not even in the severe crisis of the 1970s.

Eurozone inflation has already hit a record 8.6%, but given current trends, Europeans could see much higher levels,” Deev said.

Along with this, European consumers fear a reduction in fuel supplies from the United States.

It is noteworthy that for the first summer month, the United States for the first time in history slightly outperformed Russia in terms of gas exports to the EU.

Such data is provided by the International Energy Agency.

Meanwhile, a fire broke out at Freeport LNG, one of America's largest LNG plants, in June, as a result of which the plant will be closed for repairs until early October.

“The negative effect for recipients is becoming critical.

There is a real danger of a physical shortage of fuel before the autumn-winter season, which can lead to a halt in many industries and limit the growth of the EU economy.

In this case, Europe will be forced to drastically save energy and look for new ways to receive energy resources, ”Mark Goykhman, chief economist at the TeleTrade information and analytical center, told RT.

It is curious that against this background, the European Parliament proposes to completely ban Russian gas supplies and establish the so-called fair distribution of scarce fuel among EU members.

This, in particular, was stated by the head of the European People's Party Manfred Weber in an interview with the German newspaper Der Tagesspiegel.

However, the initiative of the parliamentarian was categorically rejected by the Hungarian government.

“Hungarian gas storage facilities will remain the property of Hungary.

Gas purchased with Hungarian taxpayers' money and stored in Hungarian gas storage facilities will be used in Hungary.

Weber's proposal somehow reminds us of communism," TASS quoted Hungarian Foreign Minister Peter Szijjártó as saying.

In Germany, meanwhile, there are proposals to temporarily launch Nord Stream 2.

Such an initiative, for example, was made by the head of the Bundestag committee on energy and climate protection, Klaus Ernst, in an interview with the Rheinische Post newspaper.

According to Gazprom, the Russian side is ready to promptly start pumping raw materials through the pipeline.

However, the final decision will depend on the political will of the European authorities, experts say.

“Abandoning sanctions against the Russian Federation in such a situation is to admit the failure of their political decisions.

What Europe is ready to sacrifice - its political image or its own economy - the winter will show, ”concluded Artyom Deev.