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The maintenance of Nord Stream 1 will be carried out from 11 to 21 July Fears that the shutdown could be extended The Kremlin says the shutdown is a regular occurrence Prolonged suspension would hurt economies, raise prices
LONDON/FRANKFURT, July 11 (Reuters) – The largest single pipeline carrying Russian natural gas to Germany began annual maintenance on Monday, with flows expected to stop for ten days, but governments, markets and companies worry the shutdown may be extended due to war in Ukraine. The Nord Stream 1 pipeline transports 55 billion cubic meters (bcm) of natural gas annually from Russia to Germany under the Baltic Sea. Maintenance runs from July 11 to 21. Last month, Russia cut flows to 40 percent of the pipeline’s total capacity, citing the delayed return of equipment served by Germany’s Siemens Energy ( ENR1n.DE ) in Canada. read more Sign up now for FREE unlimited access to Reuters.com Register Canada said over the weekend it would return a repaired turbine, but also said it would extend sanctions against Russia’s energy sector. read more Europe fears Russia may extend scheduled maintenance to further cut European gas supplies, throwing into disarray plans to fill storage for the winter and exacerbating a gas crisis that has prompted emergency measures by governments and painfully high bills for consumers. German Economy Minister Robert Habeck said the country must face the possibility of Russia suspending natural gas flows through Nord Stream 1 beyond the scheduled maintenance period. “Based on the pattern we’ve seen, it wouldn’t be too surprising now if some small, technical detail is found and then they could say ‘now we can’t turn it on anymore,’” he said at an event in late 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, planned event and that no one was “inventing” repairs. read more There are other major pipelines from Russia to Europe, but flows are gradually declining, especially after Ukraine cut off a natural gas transit route in May, blaming interference by Russian occupation forces. Russia has completely cut off gas supplies to several European countries that did not comply with its demand for payment in rubles. “The last few months have shown one thing: Putin knows no taboos. Therefore, a complete stoppage of natural gas supplies via the Nord Stream pipeline cannot be ruled out,” said Timm Kehler, CEO of the German industry association Zukunft Gas.
TURBINE PROBLEM
Germany over the weekend welcomed Canada’s decision to issue a “limited and revocable permit” to allow 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 tailoring sanctions imposed on Moscow “to the whims of Russia.” Siemens Energy said it is working on further official approvals and logistics to install the equipment as soon as possible. read more Zongqiang Luo, a gas analyst at consultancy Rystad Energy, said it was “not impossible” that Gazprom would use any delay as an excuse to extend the maintenance period. In previous years, the annual maintenance period on Nord Stream 1 lasted approximately 10-12 days and was completed on time. It is not uncommon for additional faults to be found during routine maintenance on natural gas pipelines or infrastructure, and operators can extend outages if necessary. While a complete gas outage is considered unlikely, Gazprom is not rerouting flows through other pipelines, meaning a prolonged reduced flow is likely, Goldman Sachs analysts said.
FINANCIAL HIT OF MULTIPLE BILLION
Germany has moved into the second stage of a three-tier gas emergency plan, which is a step before the government takes care of fuel consumption. It has also warned of a recession if Russian gas flows stop. The hit to the economy could be 193 billion euros ($195 billion) in the second half of this year, according to figures from the Bavarian state industry association vbw last month. “The abrupt end to Russian gas imports would also have a significant impact on the workforce in Germany…around 5.6 million jobs would be affected by the consequences,” vwb CEO Bertram Brossardt said. read more The results would be even wider. A complete shutdown would keep European gas prices, which have already spurred industry and households, higher for longer. Wholesale gas prices in the Netherlands, the European benchmark, have risen more than 400% since last July. “If Nord Stream is interrupted or if Germany loses all its Russian imports, then the effect will be felt in the whole of northwestern Europe,” said Dutch Energy Minister Rob Jetten. In an interview with Reuters on Thursday, he said that the Dutch Groningen gas field could still be called upon to help neighboring countries in the event of a complete cutoff of Russian supplies, but the increase in production could trigger earthquakes. read more Meanwhile, the disruption of supply through Nord Stream 1 would hurt Russia as well as Western Europe because it would lose revenue. Russia’s finance ministry said in June it expected to receive 393 billion rubles ($6.4 billion) in additional oil and gas revenues compared to the amount expected in its budget. read more For July, it expects 259 billion rubles above its budget plan. The extended maintenance could also lead to more Russian gas production outages, compared to the 9% year-over-year decline reported so far, Goldman Sachs said. ($1 = 0.9898 euros) ($1 = 61.5000 rubles) Sign up now for FREE unlimited access to Reuters.com Register Reporting 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. edited by Veronica Brown and Barbara Lewis Our Standards: The Thomson Reuters Trust Principles.
