Europe on edge as Russian gas link Nord Stream is shut down


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

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  • Maintenance on Nord Stream 1 will run from July 11-21
  • Fear outages can be extended
  • Kremlin says shutdown is a regular event
  • Prolonged shutdown would hurt economies, raise prices

LONDON/FRANKFURT, July 11 (Reuters) – The largest single pipeline carrying Russian gas to Germany began annual maintenance on Monday. war in Ukraine.

The Nord Stream 1 pipeline transports 55 billion cubic meters (bcm) of gas annually from Russia to Germany under the Baltic Sea. Maintenance lasts from 11 to 21 July.

Operator Nord Stream AG confirmed that the shutdown started as planned at 0600 CET and that gas flows would drop to zero a few hours later.

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Last month, Russia cut flows to 40% of the pipeline’s total capacity, citing the delayed return of equipment maintained by Germany’s Siemens Energy (ENR1n.DE) in Canada. read more

Canada said over the weekend it would return a repaired turbine, but it also said it would extend sanctions against Russia’s energy sector. read more

Europe fears that Russia could extend scheduled maintenance to further limit Europe’s gas supplies, shattering plans to fill storage for the winter and exacerbating a gas crisis that has led to emergency measures from governments and painfully high bills for consumers.

German Economy Minister Robert Habeck has said the country must face the possibility that Russia will suspend gas flows through Nord Stream 1 outside the planned maintenance window.

“Based on the pattern we’ve seen, it wouldn’t be very surprising now if a small, technical detail is found and they could say ‘now we can’t turn it on anymore,'” he said at an event on the end of June.

Kremlin spokesman Dmitry Peskov rejected claims that Russia was using oil and gas to exert political pressure, saying the maintenance shutdown was a regular, scheduled event and no one was “inventing” repairs. read more

There are other major pipelines from Russia to Europe, but flows have gradually declined and Ukraine shut down one gas transit route in May, blaming interference by the Russian occupying forces.

Russia has halted gas supplies to several European countries that failed to meet its ruble payment requirement.

“The past months have shown one thing: Putin knows no taboos. A complete cessation of gas supply via the Nord Stream pipeline can therefore not be ruled out,” said Timm Kehler, director of the German trade association Zukunft Gas.

TURBINE PROBLEM

Germany last weekend welcomed Canada’s decision to issue a “time-limited and revocable permit” allowing the return of equipment for the Nord Stream 1 pipeline.

But Ukraine’s energy and foreign ministries said they were “deeply disappointed” and urged Canada to reverse a decision they said amounted to adjusting sanctions against Moscow “at the whim of Russia”.

Siemens Energy said it was working on further formal approvals and logistics to have the equipment in place as soon as possible. read more

Zongqiang Luo, a gas analyst at consultancy Rystad Energy, said it was “not impossible” that Gazprom could use any delay as a justification for extending the maintenance period.

In previous years, the annual maintenance period on Nord Stream 1 has lasted approximately 10-12 days and has been completed on time.

It is not uncommon for additional failures to be detected during routine maintenance on pipelines or gas infrastructure and operators can extend outages if necessary.

While a complete shutdown of gas is considered unlikely, Gazprom has not diverted flows through other pipelines, meaning a prolonged reduced flow rate is likely, Goldman Sachs analysts said.

ECONOMIC BATTLE

Germany has moved into phase two of a three-pronged emergency gas plan, one step before the government rations fuel consumption.

It has also warned of a recession if Russian gas flows are halted. The blow to the economy could be 193 billion euros ($195 billion) in the second half of this year, data from the Bavarian state trade association vbw showed last month.

“The abrupt end of Russian gas imports would also have a significant impact on the workforce in Germany… About 5.6 million jobs would be affected by the impact,” said Bertram Brossardt, general manager of vwb. read more

The effects would be even greater. A complete shutdown would keep European gas prices stable for longer, as industry and households are already stung.

The Dutch wholesale price for gas, the European benchmark, has risen by more than 400% since July last year.

“If Nord Stream is cut off, or if Germany loses all of its Russian imports, the effect will be felt across Northwest Europe,” said Energy Minister Rob Jetten.

In an interview with Reuters on Thursday, he said the Dutch Groningen gas field could still be called in to help neighboring countries in the event of a complete disruption of Russian supplies, but ramping up production would risk triggering earthquakes. read more

A cessation of supplies via Nord Stream 1 would harm both Russia and Western Europe.

Russia’s finance ministry had said in June it expected to receive 393 billion rubles ($6.4 billion) more oil and gas revenues than forecast in its budget schedule. read more

For July, it expects 259 billion rubles more than foreseen in its budget plan.

Long-term maintenance could also lead to more shutdowns in Russian gas production, compared to the 9% year-on-year decline in Gazprom production reported so far this year, Goldman Sachs said.

($1 = 0.9898 euros)

($1 = 61,5000 rubles)

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Report by Nina Chestney in London and Vera Eckert in Frankfurt Additional reporting by Tom Kaekenhoff in Frankfurt, Steve Scherer in Ottawa, Toby Sterling in Amsterdam and Miranda Murray and Riham Alkousaa in Berlin Editing by Veronica Brown, Barbara Lewis and David Goodman

Our Standards: The Thomson Reuters Trust Principles.

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