The repair of the Russian pipeline worries Europe

When Russia shuts off gas through the Nord Stream 1 pipeline for maintenance in July, Europe begins to fear it won’t turn it back on.

This week, Russia cut gas flows to Europe to 40% of pipeline capacity, blaming delays in repairing equipment and leaving Germany and other European states scrambling to find alternative supplies for avoid the risk of rationing on the arrival of winter.

Now Europe fears that President Vladimir Putin will use a scheduled maintenance program on the July 11-21 pipeline to turn the screw, hampering stockpile replenishment efforts in retaliation for wide-ranging sanctions over the Moscow’s invasion of Ukraine.

“We are in another episode of the energy war launched by the Russian dictator Putin,” Czech Industry Minister Jozef Sikela said on Friday June 24. “And we don’t know how far this will escalate. It cannot be ruled out that shipments drop or stop completely.

The head of the International Energy Agency also warned on Wednesday June 22 that Russia could completely cut off gas to Europe to boost its political influence.

The Kremlin said Russia remained a reliable energy supplier and was ‘strictly fulfilling all its obligations’ to Europe, blaming the cut in supply on sanctions that delayed the return of serviced equipment from Canada to the gas supplier Russian Gazprom.

Some European countries, however, said it was a pretext to send less gas and drive up prices, prompting Germany to trigger the “alarm phase” of its emergency gas plan while d Others have defined measures to avoid winter shortages.

German Economy Minister Robert Habeck said he was heading for a gas shortage if supplies of Russian gas remained as low as they are now, and that some industries would have to be shut down if it didn’t. there weren’t enough in the winter.

“Companies would have to shut down production, lay off their workers, supply chains would collapse, people would go into debt to pay their heating bills, those people would get poorer,” Habeck said. The Spiegel magazine on Friday, saying it was part of Putin’s strategy to divide the country.

Gas bills are set to rise further this summer for German households who are already paying more than double what they paid last year, internet portal Check24 said.

Over the past few years, maintenance shutdowns for Nord Stream 1, the main pipeline bringing gas from Russia to Europe’s biggest economy, have been completed on time.

This year, gas traders and analysts suspect that Russia will at least take the opportunity to prolong the blackout, putting upward pressure on European benchmark wholesale prices, which have already risen nearly 100%. so far this year.

Gazprom did not respond to a request for comment on Friday.

On Thursday, June 23, Kremlin spokesman Dmitry Peskov told reporters: “Our German counterparts are well aware of the technical maintenance cycles of gas pipelines…. It has been working for many years, it works properly, flawlessly. Therefore, it is strange to drag politics into everything here.

Russia’s income

Europe gets 40% of its gas from Russia and both sides stand to lose if the supply is completely cut off.

In energy markets, scheduled outages for maintenance of infrastructure such as pipelines and power plants are common and often required by safety regulations.

Operators must inform the market in advance of these cuts and they provide an opportunity to carry out work during periods when energy demand is generally lower, such as summer.

It is not uncommon for additional faults to be detected and corrected during routine shutdowns. Operators can extend maintenance periods to do this, but they should alert the market.

“The concern that NS1 maintenance is an opportunity to find an excuse to extend zero flows through the pipeline is valid. However, keep in mind that Russia cannot replace the EU as a strong and solvent buyer,” said one trader, referring to Europe being Russia’s biggest gas customer.

Earlier this month, Russia’s Finance Ministry said it expected to receive 393 billion rubles ($7.3 billion) in additional oil and gas revenue in June.

Ole Hansen, head of commodities strategy at Saxo Bank, said Russia did not have enough buyers to make up for the potential shortfall in European revenue.

“Unlike crude oil, Russia sells most of its gas through pipelines to Europe and Asia, and given the current restrictions on ships carrying Russian goods, they have no other buyers. lined up,” he added.

If Nord Stream 1 isn’t fixed by mid-July, Europe won’t have enough gas supply through the winter, Goldman Sachs analysts say, and wholesale gas prices will increase further.

“As Europe responds with a range of measures, including restarting coal capacity and implementing industrial gas auctions to reduce demand, we are seeing upside growth for [Dutch gas] prices and tighter constraints on North West European gas demand, should the situation deteriorate further,” they said.

This will make it even more difficult to fill gas storage sites if Nord Stream 1 receives extended maintenance. European sites are currently 55% full and the target is 80% by November 1.

If pipeline flows continue at 40% capacity or stop altogether, Europe will only be able to fill storage to 69% and 60% respectively, according to consultants Wood Mackenzie and Rystad Energy. –

$1 = 54.0340 rubles

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