Russia left one of its main gas supply routes to Europe shut on Saturday, sparking sears of winter fuel shortages and underlining differences between Germany’s Siemens Energy (ENR1n.DE) and Gazprom (GAZP.MM) over maintenance on the pipeline.
Already struggling to curb rising gas prices, European governments had anticipated the Nord Stream 1 pipeline to restart flows after short maintenance this week but Russia suddenly delayed the restart, pointing to an oil leak in a turbine.
Europe has blamed Russia for weaponizing energy supplies in what Moscow has called an “economic war” with the West over the fallout from Russia invading Ukraine. Moscow condemns Western sanctions and technical issues for supply chains.
The most recent Nord Stream shutdown, which Russia says will continue for as long as it takes to conduct repairs, added to fears of winter gas shortages that could help steer big economies into recession and energy rationing.
In that context, the discovery of the oil leak on Friday collided with the Group of Seven (G7) wealthy democracies moving forward with plans to impose a price gap on Russian oil, aiming to limit President Vladimir Putin’s resources to fight the war in Ukraine.
Gas shortages also prompted European Union member Sweden on Saturday to launch a financial support package for energy firms.
Prime Minister Magdalena Andersson said:
“If we do not act, there is a serious risk of disruptions in the financial system, which in the worst case could lead to a financial crisis. Putin wants to create division, but our message is clear: you will not succeed.”
GAS PRICE RALLY EXPECTED
Gazprom said Siemens Energy was prepared to conduct repairs on the pipeline but that there was nowhere available to accomplish the work, a suggestion Siemens rejected, saying it had not been requested to do the job.
Siemens Energy has also said that sanctions do not prevent maintenance. Before the most recent round of maintenance, Gazprom had already reduced flows to just 20% of the pipeline’s capacity.
Gazprom said in a statement on its Telegram channel on Saturday:
“Siemens is taking part in repair work in accordance with the current contract, is detecting malfunctions … and is ready to fix the oil leaks. Only there is nowhere to do the repair.”
Siemens Energy said it had not been contracted to do the work but was available, adding that the Gazprom-reported leak would not normally alter the operation of a turbine and could be shut off on-site.
A spokesperson for the company said:
“Irrespective of this, we have already pointed out several times that there are enough additional turbines available in the Portovaya compressor station for Nord Stream 1 to operate.”
Flows through Nord Stream 1 were expected to restart early on Saturday morning. But hours before it was set to begin pumping gas, Gazprom posted a photo on Friday of what it said was an oil leak on a piece of equipment.
Siemens Energy, which delivers and services equipment at Nord Stream 1’s Portovaya compressor station said on Friday the leak did not comprise a technical reason to halt gas flows.
Tom Marzec-Manser, Head of Gas Analytics at ICIS, said on Twitter:
“Global natural gas prices will likely rally hard on Monday as markets readjust to this latest #Gazprom development. The closure of #NordStream1 reduces overall Russian pipeline flows yet further and will make balancing supply & demand this winter all the more difficult.”
Asked about the halt on Saturday, Economic Commissioner Paolo Gentiloni said that the European Union anticipates Russia to honor its agreed energy contracts but is ready to address the challenge if Moscow fails to do so.
Buy Bitcoin NowThe German network regulator said that the country’s gas supply was currently assured but the situation was delicate and additional deterioration could not be prevented. It stated:
“The defects alleged by the Russian side are not a technical reason for the halt of operations.”
Wholesale gas prices have climbed more than 400% since August 2021, squeezing households already hit by a cost-of-living crisis and pushing some energy-hungry industries, such as aluminium and fertilizer makers, to cut back production.
The European Commission has said a complete disconnection of Russian gas supplies to Europe, if combined with a cold winter, could shrink the average EU gross domestic product by up to 1.5% if countries did not get ready in advance.
