Europe is on edge about the restart of the Nord Stream 1 gas pipeline from Russia as annual maintenance is set to end tomorrow, with governments bracing for possible further supply cuts.
The Nord Stream 1 gas pipeline from Russia has been closed for maintenance, with European leaders fearing it may remain offline, increasing the chances of a recession. Photo: AFP / DPA
A planned outage on the biggest single pipeline carrying Russian gas to Germany started on July 11 and is expected to end at 6am on July 21 (local time). It transports 55 billion cu/m a year of gas under the Baltic Sea.
If the outage is extended, the operator Nord Stream AG should make that clear on its website, where the flows section would indicate either a resumption or zero gas.
Nord Stream 1 in the last two years resumed gas deliveries on time after the maintenance that takes place every summer.
This July, the delay of a turbine being serviced in Canada and Gazprom's declaration of force majeure to European customers, meaning it cannot guarantee delivery because of exceptional circumstances, has raised concerns of a prolonged outage.
Two sources familiar with Gazprom's plans told Reuters on Wednesday that flows were likely to restart at pre-maintenance levels of 40 percent of the pipeline's capacity.
The head of Germany's energy regulator on Wednesday said he expected the pipeline to resume at around 30 percent of capacity based on nominations, or requests, for gas at Lubmin, where Nord Stream 1 makes landfall in Germany.
There is still time for those nominations to change before the maintenance is scheduled to end.
While better than no resumption, gas flows at reduced capacity would still have the effect of disrupting Europe's storage plans and heightening a gas crisis that has prompted emergency measures from governments and painfully high bills for consumers.
Turbine flashpoint
As the West accuses Moscow of using its energy resources as a weapon and reprisal for anti-Russian sanctions, some European governments, such as Germany, have said any turbine delay could provide Russia with a pretext to extend maintenance.
Canada has said it had issued a permit for the turbine's return, but it is not known when it will reach the Nord Stream pipeline.
Russian President Vladimir Putin has also said it was not clear in what condition the turbine would be returned after the repairs in Canada, adding to uncertainty about the pipeline's restart.
Russia insists it is a reliable supplier and dismisses Western charges it is using energy to blackmail Europe. It also said the West was waging economic warfare against Moscow.
Russian gas giant Gazprom has said the turbine is necessary for Nord Stream 1's safety and has said it has not received documentation from Siemens Energy that maintained the turbine, which it needs to reinstall it.
Gazprom has not commented on its declaration of force majeure, retroactively dated from June 14 when Russia reduced gas flows to 40 percent of capacity, citing the missing turbine.
Traders, speaking on condition of anonymity, viewed the declaration as an attempt to protect Gazprom from any legal action over breach of contract.
Together with analysts and governments, they also braced for months of tension and possibly varying gas flows.
"With European leaders being determined to increase sanctions towards the Kremlin, the likelihood has increased that the Russian government will announce the next step in further cutting back the gas flows towards Europe as a counter reaction," Hans van Cleef, senior energy economist at ABN Amro, said.
Other analysts also expect flows to be cut further in the next months, but note Russia needs income as much as Europe needs gas.
"We think that the most likely scenario is that Nord Stream flows restart and move back to capacity when Gazprom receives the gas turbine from Siemens, but risks remain of further reductions in the following weeks or months," analysts at investment bank Jefferies said in a note.
"We believe that Russia's aim is to prevent Europe from building gas inventories ahead of winter, keep gas prices high, maximise economic damage and retain leverage. The latter is not achieved if volumes are reduced to zero," they added.
According to the Finland-based research organisation Centre for Research and Clean Air, Russia earned 24 billion euros ($24.6 billion) from pipeline gas revenues in the first 100 days of the Ukraine war.
For Europe, too, the economic stakes are high.
About 32 percent of Europe's of gas consumption comes from Russia, 90 percent of which is through pipelines. Russia is also heavily reliant on the European market, with 82 percent of its pipeline gas exports going to the continent, Barclays analysts said.
The European Commission has said a full cut-off of Russian gas supplies to Europe, if combined with a cold winter, could reduce average EU gross domestic product by up to 1.5 percent if countries do not prepare in advance.
The European Commission President Ursula von der Leyen today said a full cut-off was "a likely scenario", as the EU executive proposed a voluntary target for member states to cut gas use by 15 percent until March.
-Reuters