Russian gas company Gazprom to cut off part of Shell’s supply

gas line technician

Shell said it would work to keep gas flowing to customers in Europe after Russian energy firm Gazprom said it would cut supplies from tomorrow.

Gazprom said it would cut off supplies from Denmark’s Orsted and Shell for its contract to supply gas to Germany, after the two refused to make ruble payments, Reuters reported.

Shell told the BBC it would continue to source gas from its other sources.

The gas giant said it would continue to phase out Russian fossil fuels.

Gazprom’s move comes after European Union leaders said they would block most Russian oil imports by the end of 2022 to punish Moscow for invading Ukraine.

In response to Western sanctions, Russia has already cut gas supplies to Poland, Bulgaria, Finland and the Netherlands, after these countries refused to comply with Russian demands to switch to payment in rubles.

The latest decision extends these reprisals to Germany and Denmark.

Vladimir Putin’s decree was seen as an attempt to boost the Russian currency, which has been hit with sanctions because greater foreign currency demand for rubles is likely to increase demand and drive up its value.

Shell told the BBC it had not agreed to “new payment terms set out by Gazprom”, which included setting up Russian bank accounts.

“We will work to continue to supply our customers in Europe through our diversified gas supply portfolio,” a spokesperson said.

“Shell continues to work on a phased withdrawal of Russian hydrocarbons, in accordance with applicable laws and regulations.”

Meanwhile, Orsted said on Monday that stopping gas flows by Gazprom would put Danish supplies at risk.

Shell has taken a $5bn (£3.8bn) hit from offloading its Russian assets as part of its plans to sever ties with the country. He also confirmed that he had left his joint ventures with Gazprom.

The company pledged in April not to buy any more oil from Russia, but said contracts signed before the invasion of Ukraine would be honored.

Shell was criticized when it bought Russian crude oil at low prices shortly after the start of the war.

higher prices

The war in Ukraine prompted Western countries to phase out Russian energy supplies.

Europe gets around 40% of its natural gas from Russia, which is also the bloc’s main oil supplier, but some countries are more dependent on Russian fossil fuels than others, so sudden cuts in supply could have a huge economic impact.

Nathan Piper, head of oil and gas research at Investec, said it was “clear” that European countries and companies wanted to reduce imports of Russian fossil fuels.

However, he warned of the “permanent risk that efforts to reduce Russian oil and gas imports will lead to higher oil and gas prices” = limiting the impact on Russia.

“Russian volumes may be gradually reduced but they are ‘compensated’ by higher overall prices,” he added.

He said the geopolitical tensions were linked to “an oil and gas market that was already tight before the invasion of Ukraine”.

Gas exports from Russia

Gas exports from Russia

Countries filled gas storage sites ahead of winter due to threats of Russian supply cuts.

So far, no sanctions on Russian gas exports to the EU have been put in place, although plans to open a new gas pipeline between Russia and Germany have been frozen.

Meanwhile, EU leaders have agreed to an immediate ban on the transport of Russian oil into the bloc by sea.

In late March, Russia said “hostile countries” should start paying for its oil and gas in rubles after Western allies froze billions of dollars it held in foreign currency abroad.

Under the decree, European importers must deposit euros or dollars into an account at Gazprombank, the Swiss trading arm of Gazprom, and then convert them into rubles in a second account in Russia.

The majority – 97% – of EU companies’ gas supply contracts with Gazprom stipulate payment in euros or dollars.

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