Europe’s gas supply crisis worsens after Russia imposes sanctions

  • Russia imposes sanctions on European subsidiaries of Gazprom
  • The Polish company operating the Yamal-Europe section was also affected
  • Germany will lose 10 million m3/day of gas supply
  • Gas prices in the Netherlands close up 12%

BERLIN, May 12 (Reuters) – Pressure on Europe to secure alternative gas supplies grew on Thursday as Moscow imposed sanctions on European subsidiaries of state-owned Gazprom the day after the US shutdown an important gas transit route in Ukraine.

Gas prices surged, with Europe’s main benchmark gaining 12% as buyers were unsettled by growing threats to supply from Europe given its heavy reliance on Russia.

Moscow has already cut off supplies to Bulgaria and Poland and the countries are rushing to fill dwindling gas reserves before winter.

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On Wednesday evening, Russia imposed sanctions mainly on the European subsidiaries of Gazprom (GAZP.MM), including Gazprom Germania, an energy trading, storage and transmission company that Germany placed under guardianship last month for secure its supplies. Read more

He also imposed sanctions on the owner of the Polish part of the Yamal-Europe gas pipeline which transports Russian gas to Europe.

Kremlin spokesman Dmitry Peskov said there could be no relations with the companies involved, nor could they participate in the supply of Russian gas.

The relevant entities, listed on a Russian government website, are largely based in countries that imposed sanctions on Russia in response to its invasion of Ukraine, most of which are members of the European Union.

Germany, Russia’s biggest customer in Europe, said some Gazprom Germania subsidiaries were not receiving gas due to sanctions.

“Gazprom and its subsidiaries are concerned,” German Economy Minister Robert Habeck told the lower house of the Bundestag. “This means that some subsidiaries no longer get gas from Russia. But the market offers alternatives.”

The list also includes Germany’s largest gas storage facility at Rehden in Lower Saxony, with a capacity of 4 billion cubic meters and operated by Astora, as well as Wingas, a trader that supplies industry and services local audiences.

Wingas said it would continue to operate but face shortages. Competitors Uniper (UN01.DE), VNG (EBKG.DE) or RWE (RWEG.DE) could be potential sources of market supply. Russian gas flows to Germany continue via the Nord Stream 1 gas pipeline under the Baltic Sea.

If the sanctioned companies cannot operate, other companies such as gas utilities could take over the contracts, which would likely involve agreeing new terms with Gazprom, including for payment, said Henning Gloystein, director of the Eurasian group.

“That may be what Gazprom intends here, beyond sending a signal of retaliation (for EU sanctions),” he added.

TRANSIT

Gazprom said it would no longer be able to export gas through Poland via the Yamal-Europe pipeline after sanctions against EuRoPol Gaz, owner of the Polish section.

The pipeline connects Russia’s gas fields on the Yamal Peninsula and Western Siberia to Poland and Germany, via Belarus, and has a capacity of 33 billion cubic meters (bcm), about one-sixth of exports of Russian gas to Europe.

However, gas has been flowing east through the pipeline from Germany to Poland for a few weeks, allowing Poland – which was cut off from Russian supplies with Bulgaria last month for refusing to comply with a new payment mechanism – to build up inventory.

Outflows to Poland at the Mallnow metering point on the German border stood at 9,734,151 kilowatt hours per hour (kWh) on Thursday, down from around 10,400,000 kWh the day before, according to data from the operator of the Gascade gas pipeline.

Germany’s Habeck said the Russian measures appeared designed to push up prices, but the expected 3% drop in Russian gas supplies could be made up on the market, albeit at a higher cost.

Dutch gas prices at the TTF hub, the European benchmark, rose 20% before closing up 12%. The benchmark has soared over the past year, adding to the burden on households and businesses.

Although German gas storage is around 40% full, this is still low for the time of year and stocks need to be built up in anticipation of winter.

WINTER

Moscow’s sanctions came just a day after Ukraine halted a gas transit route, blaming interference by Russian occupation forces, the first time exports through Ukraine have been halted since invasion. Read more

The Sokhranovka gas transit point will not be reopened until kyiv gains full control of its gas pipeline network, the head of operator GTSOU said, adding that flows could be redirected to the transit point. alternative transit from Sudzha, although Gazprom said this was not the case. technologically possible. Read more

Ukraine’s gas transit system operator said Gazprom had reserved 65.67 million cubic meters of capacity through the Sudzha entry point for Friday, compared to 53.45 million cubic meters for Thursday.

While the European Commission has said the Ukrainian suspension does not pose an immediate gas supply problem, the market is worried about winter, when heating demand will increase and global supply constraints will be felt. . Read more

“Storage levels are currently sufficient to last for most of 2022, even if Russian flows were to stop instantly, barring unexpected weather events – but the outlook for winter 2022 supply is now much more pessimistic,” said Kaushal Ramesh, principal analyst at consultancy Rystad Energy.

Finnish politicians have been warned that Russia may cut off gas supplies to its neighbor on Friday, Iltalehti newspaper reported, citing unnamed sources. Gas accounts for around 5% of Finland’s energy consumption. Read more

Confusion also reigns among EU gas companies over a payment scheme decreed by Moscow in March that the European Commission says violates EU sanctions.

Germany’s top power producer RWE (RWEG.DE) expects Berlin to clarify soon whether payments for Russian gas can be made under Moscow’s proposed scheme, its chief financial officer said on Thursday. , as the deadline approaches at the end of the month.

Russia’s ruble payment request has been rejected by most European gas buyers over details of the process, which requires opening accounts with Gazprombank, fueling fears of possible supply disruptions and their consequences deep for Europe and in particular Germany, which depends heavily on Russian gas.

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Reporting by Joseph Nasr and Markus Wacket in Berlin; Additional reporting by Christoph Steitz and Vera Eckert in Frankfurt, Nora Buli in Oslo, Marek Strzelecki in Warsaw, Thomas Balmforth in kyiv, Kate Abnett in Brussels; written by Nina Chestney Editing by Edmund Klamann, Kirsten Donovan

Our standards: The Thomson Reuters Trust Principles.

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