Russia keeps pipeline closed as Gazprom and Siemens Energy squabble

Pipes from the landing facilities of the ‘Nord Stream 1’ gas pipeline are pictured in Lubmin, Germany March 8, 2022. REUTERS/Hannibal Hanschke/File Photo

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September 3 (Reuters) – Russia closed one of its main gas supply routes to Europe on Saturday, fueling fears of winter fuel shortages and highlighting differences between Gazprom (GAZP.MM) and Germany’s Siemens Energy (ENR1n.DE) regarding repair work on the pipeline.

Already struggling to rein in soaring gas prices, European governments expected the Nord Stream 1 gas pipeline to resume flows after a short maintenance this week, but Russia abruptly canceled the restart, citing an oil leak in a turbine.

Europe has accused Russia of weaponizing energy supplies in what Moscow called an “economic war” with the West over fallout from Russia’s invasion of Ukraine. Moscow blames Western sanctions and technical problems for supply disruptions.

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The latest shutdown of Nord Stream, which Russia says will last as long as it takes to complete repairs, added to fears of winter gas shortages that could help tip major economies into recession and the energy rationing.

The discovery of the oil leak on Friday coincided with wealthy Group of Seven (G7) democracies pushing ahead with their plans to impose a price differential on Russian oil, with the intention of squeezing President Vladimir’s resources Putin to wage war in Ukraine.

Gas shortages also prompted European Union member Sweden to unveil a financial support package for energy companies on Saturday.

“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,” said Prime Minister Magdalena Andersson.

“Putin wants to create division, but our message is clear: you won’t,” she said.

GAS PRICE RALLY EXPECTED

Gazprom said Siemens Energy was ready to carry out repairs to the pipeline but there was no place available to carry out the work, a suggestion which Siemens Energy denied, saying it had not been asked to do so. to do work.

Siemens Energy also said the sanctions do not prohibit maintenance.

Prior to the last maintenance cycle, Gazprom had already reduced throughputs to just 20% of the pipeline’s capacity.

“Siemens participates in repair work in accordance with the current contract, detects malfunctions… and is ready to fix oil leaks. Only there is nowhere to do the repair,” Gazprom said in a statement. communicated on his Telegram channel. Saturday.

Siemens Energy said it was not contracted to carry out the work but was available, adding that the leak reported by Gazprom would generally not affect the operation of a turbine and could be sealed in place.

“Regardless of this, we have already stressed on several occasions that there are enough additional turbines available at Portovaya Compressor Station for Nord Stream 1 to operate,” a company spokesperson said.

Streams via Nord Stream 1 were due to resume early Saturday morning. But hours before it started pumping gas, Gazprom released a photo on Friday of what it said was an oil leak on equipment.

Siemens Energy, which supplies and maintains equipment at Nord Stream 1’s compressor station in Portovaya, said on Friday the leak was not a technical reason to stop gas flows.

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“Global natural gas prices are likely to rise sharply on Monday as markets readapt to this latest development from #Gazprom,” said Tom Marzec-Manser, head of gas analytics at ICIS, on Twitter.

“The closure of #NordStream1 further reduces overall flows from the Russian pipeline and will make it all the more difficult to balance supply and demand this winter.”

Asked about the shutdown on Saturday, Economy Commissioner Paolo Gentiloni said the European Union expects Russia to honor its agreed energy contracts, but is ready to rise to the challenge if Moscow does not. Read more

Germany’s grid regulator said the country’s gas supply was currently guaranteed but the situation was fragile and further deterioration could not be ruled out.

“The flaws alleged by the Russian side are not a technical reason for halting operations,” he said.

Wholesale gas prices have soared more than 400% since August 2021, squeezing households already struggling with a cost-of-living crisis and forcing some energy-intensive industries, such as fertilizer and aluminum makers, to reduce their production.

The European Commission has said that a complete cut in Russian gas supplies to Europe, if combined with a cold winter, could reduce the EU’s average gross domestic product by up to 1.5% if countries did not prepare in advance.

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Reporting by Riham Alkousaa, Nina Chestney, Supantha Mukherjee and Johan Ahlander; written by Matthias Williams Editing by Jason Neely, Emelia Sithole-Matarise and Louise Heavens

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