Europe on edge as Nord Stream Russian gas link enters shutdown

LONDON/FRANKFURT, July 11 (Reuters) – The greatest single pipeline carrying Russian gas to Germany started annual upkeep on Monday, with flows anticipated to cease for 10 days, however governments, markets and firms are nervous the shutdown is likely to be prolonged due to the struggle in Ukraine.

The Nord Stream 1 pipeline transports 55 billion cubic metres (bcm) a yr of gas from Russia to Germany below the Baltic Sea. Maintenance lasts from July 11 to 21.

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

Last month, Russia reduce flows to 40% of the pipeline’s complete capability, citing the delayed return of apparatus being serviced by Germany’s Siemens Energy (ENR1n.DE) in Canada. learn extra

Canada mentioned on the weekend it could return a repaired turbine, but it surely additionally mentioned it could develop sanctions in opposition to Russia’s power sector. learn extra

Europe fears Russia might prolong scheduled upkeep to limit European gas provide additional, throwing plans to fill storage for winter into disarray and heightening a gas disaster that has prompted emergency measures from governments and painfully excessive payments for shoppers.

German Economy Minister Robert Habeck has mentioned the nation ought to confront the chance that Russia will droop gas flows by Nord Stream 1 past the scheduled upkeep interval.

“Based on the pattern we’ve seen, it would not be very surprising now if some small, technical detail is found and then they could say ‘now we can’t turn it on any more’,” he mentioned at an occasion on the finish of June.

Kremlin spokesperson Dmitry Peskov dismissed claims that Russia was utilizing oil and gas to exert political stress, saying the upkeep shutdown was an everyday, scheduled occasion and that nobody was “inventing” any repairs. learn extra

There are different massive pipelines from Russia to Europe, however flows have been declining progressively and Ukraine halted one gas transit route in May, blaming interference by occupying Russian forces.

Russia has reduce off gas provides to a number of European nations that didn’t adjust to its demand for cost in roubles.

“The last few months have shown one thing: Putin knows no taboos. A complete halt to gas supplies through the Nord Stream pipeline cannot therefore be ruled out,” mentioned Timm Kehler, managing director of German trade affiliation Zukunft Gas.

TURBINE TROUBLE

Germany on the weekend welcomed Canada’s choice to difficulty a “time-limited and revocable permit” to permit tools to be returned for the Nord Stream 1 pipeline.

But Ukraine’s power and overseas ministries mentioned they have been “deeply disappointed” and urged Canada to reverse a choice that they mentioned amounted to adjusting the sanctions imposed on Moscow “to the whims of Russia”.

Siemens Energy mentioned it was working on additional formal approvals and logistics to have the tools in place as quickly as doable. learn extra

Zongqiang Luo, gas analyst at consultancy Rystad Energy, mentioned it was “not impossible” Gazprom might use any delay as a justification to increase the upkeep interval.

In earlier years the annual upkeep interval on Nord Stream 1 has lasted about 10-12 days and has completed on time.

It will not be unusual for added faults to be detected throughout routine upkeep at pipelines or gas infrastructure and operators can extend outages if obligatory.

While a whole halt of gas is taken into account unlikely, Gazprom has not been re-routing flows by way of different pipelines, which means a protracted lowered movement fee is possible, analysts at Goldman Sachs mentioned.

ECONOMIC BLOW

Germany has moved to stage two of a three-tier emergency gas plan, which is one step earlier than the federal government rations gas consumption.

It has additionally warned of recession if Russian gas flows are halted. The blow to the financial system may very well be 193 billion euros ($195 billion) within the second half of this yr, knowledge from the vbw trade affiliation of the state of Bavaria confirmed final month.

“The abrupt end of 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,” mentioned Bertram Brossardt, vwb’s managing director. learn extra

The results could be wider nonetheless. A whole halt would maintain European gas costs increased for longer, having already stung trade and households.

Wholesale Dutch gas costs, the European benchmark, have risen greater than 400% since final July.

“If Nord Stream gets cut off, or if Germany loses all its Russian imports, then the effect will be felt on the whole of north-western Europe,” mentioned Dutch power minister Rob Jetten.

In an interview with Reuters on Thursday, he mentioned the Dutch Groningen gas area might nonetheless be known as upon to assist neighbouring nations within the occasion of a whole reduce off in Russian provides, however ramping up manufacturing would threat inflicting earthquakes. learn extra

A halt of provide by Nord Stream 1 would damage Russia as nicely as western Europe.

Russia’s finance ministry had mentioned in June that it anticipated to obtain 393 billion roubles ($6.4 billion) extra oil and gas income than forecast in its funds planning. learn extra

For July it expects 259 billion roubles greater than its funds plan projected.

Extended upkeep might additionally end in extra Russian gas manufacturing shut-ins, relative to the 9% year-on-year decline in Gazprom manufacturing reported to this point this yr, Goldman Sachs mentioned.

($1 = 0.9898 euros)

($1 = 61.5000 roubles)

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
Editing by Veronica Brown, Barbara Lewis and David Goodman

Our Standards: The Thomson Reuters Trust Principles.