Russia steps up gas spat with another cut to Nord Stream flows

Russia is further curbing natural gas flows on the Nord Stream pipeline just days after bringing the link back from maintenance, escalating European concerns over a supply crunch this winter.

Gazprom PJSC will cut flows via the link to Germany to about 20% of its capacity from 7 a.m. Moscow time on Wednesday, the Russian gas giant said in a statement. One more gas turbine, crucial for the supply, is due for maintenance and will be taken out of service, according to the company.

Gas had been flowing through the link at about 40% of capacity since it returned from 10 days of maintenance on July 21. That’s about the same level as before the works.

The move follows a warning from President Vladimir Putin last week — that Nord Stream flows could fall further if a spat over its equipment isn’t resolved. That’s another blow to Europe’s extremely tight energy markets, where gas prices continue to surge and governments are bracing for a crisis during the upcoming heating season.

European benchmark futures rose as much as 10% to 176 euros a megawatt-hour and were trading at 174.50 euros by 4:55 p.m. Amsterdam time.

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A reduction in Nord Stream flows “was unfortunately expected” given the recent comments from Russia, said Tom Marzec-Manser, head of gas analytics at ICIS. “The key question now is how long will this reduction to just 20% of the pipe’s capacity actually last.”

Moscow has been curbing gas shipments to the European Union for months, opening itself up to accusations that it’s using energy as a weapon, with regional tensions high following Russia’s invasion of Ukraine. The Kremlin has staunchly rejected the allegation.

The EU still relies on the little gas its getting from Russia to fill its winter stockpiles. Concerns about gas shortages have already spread to every market, with the European Commission calling on all member states to participate in the effort to save gas, regardless of how dependent they are on Russia for the fuel.

Gazprom cut Nord Stream supplies in two steps last month, citing issues with turbines at the Portovaya compressor station in Russia, which feeds the link. The company has said that those issues were caused by delays in repairs by turbine maker Siemens Energy AG — amid international sanctions against Russia — and the shutdown of some equipment following orders from Russia’s safety regulators.

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One replacement turbine, which earlier was stuck in Canada because of the sanctions, could help maintain Nord Stream flows at 40%, Putin has said. Other turbines, still in Russia, have to be sent for repairs to further recover the supply. Yet, there hasn’t been clarity on when this may happen, or if the process has even started.

The turbine from Canada is still in Germany amid paperwork delays, Russian newspaper Kommersant reported on Sunday. If Gazprom provides the required documents to Siemens Energy, the turbine shipment may happen in the next few days, it said.

Despite the turbine spat, Russia is “not interested” in a complete cutoff of its gas deliveries to Europe, Kremlin spokesman Dmitry Peskov said earlier on Monday.

Gazprom earlier said that it has received some paperwork related to the delayed delivery of a turbine for the Nord Stream natural gas pipeline, while adding that some additional issues with the equipment still remain.

© 2022 Bloomberg

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