EU gas prices rise after Russia halts Nord Stream flows

Pipes at the landing facilities of the gas pipeline “Nord Stream 1” taken in Lubmen, Germany, March 8, 2022. REUTERS/Hannibal Hanschke/File Photo

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  • The price of European gas has increased by about 400% from last year
  • EU countries launched emergency gas plans
  • Unrest hampers EU efforts to fill storage
  • Russia says sanctions are hampering pipeline operations

LONDON/OSLO (Reuters) – European gas prices rose as much as 30 percent on Monday after Russia said one of its main gas supply pipelines to Europe would remain closed indefinitely, prompting renewed concerns about shortages and gas rationing in Europe. union this winter.

The price of record gas rose to 272 euros per megawatt-hour when the market opened after Russia said on Friday that a leak in Nord Stream 1 pipeline equipment meant it would remain shut down after a three-day maintenance shutdown last week.

The Dutch TTF gas contract for October fell to 256 euros, up 23% from today by 0723 GMT, but up about 400% from a year ago. This year’s price hikes have slashed already struggling consumers, and forced some industries to halt production.

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Europe accuses Russia of arming energy supplies in response to Western sanctions imposed on Moscow over its invasion of Ukraine. Russia says the West has launched an economic war and sanctions have hampered pipeline operations.

The Nord Stream pipeline, which runs under the Baltic Sea to Germany, has historically provided about a third of the gas exported by Russia to Europe, but was already operating at just 20% of capacity before flows stopped last week for maintenance.

The supply of Russian gas supplied through Ukraine, another major route, has also been reduced, leaving the European Union racing to find alternative supplies to refill gas storage facilities for the winter. Several states have launched contingency plans that could lead to energy rationing and increase the likelihood of a recession.

“It’s getting harder to get supplies, and it’s getting harder and harder to replace every bit of the gas that doesn’t come from Russia,” said Jacob Mandel, senior commodity coordinator at Aurora Energy Research.

High energy costs have already forced some energy-hungry industries, including fertilizer and aluminum manufacturers, to scale back production, and prompted EU governments to pour billions of euros into schemes to help households. Read more

Prepare for the worst

European Union energy ministers are due to meet on Sept. 9 to discuss options to curb high energy prices, including setting a cap on gas prices and emergency credit lines for energy market participants, a document seen by Reuters showed. Read more

German Chancellor Olaf Schulz said on Sunday that Germany, the economic powerhouse in the European Union and Europe’s largest gas consumer, is preparing for a complete halt in gas deliveries.

Germany is in the second phase of a three-phase emergency gas plan. The third stage will see some legalization of the industry. Read more

In its race for alternative gas supplies, Germany is rapidly installing temporary liquefied natural gas (LNG) stations to enable it to receive gas from producers further afield, and it plans to build permanent LNG facilities. Read more

Norway, a major European gas producer, is pumping more fuel into European markets.

“There is a lot of room to replace that (Russian) gas with LNG imports right now, but when the weather gets cold and demand starts to rise in winter in Europe and Asia, there is a lot of LNG that Europe can import,” Mandel said.

The global LNG market was already tight as the global economy sucked up supplies in the recovery from the pandemic, even before the Ukraine crisis added to the challenge.

Klaus Müller, head of the energy regulator at Germany’s Federal Network Agency, said in August that even if German gas storages were 100% full, they would be empty in two and a half months if Russian gas flows were completely halted.

Storage facilities in Germany are now 85% full, while facilities across Europe hit a target of 80% last week.

Although Russian gas continues to flow into Europe through Ukraine, albeit at low levels, analysts said these supplies could also become a victim of the conflict.

“We are shifting focus to (gas) … which continues to flow into Europe via Ukraine,” James Hochstep, EMEA gas analyst at Standard & Poor’s Global Platts, said in a tweet on Twitter. “. …” before he faced those turmoil.

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Additional reporting by Susanna Tudel and Nora Polley at OSLO; Editing by Jean Harvey and Edmund Blair

Our criteria: Thomson Reuters Trust Principles.

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