Gazprom’s executive chairman has promised to maintain uninterrupted gas supplies to international markets despite Western sanctions hitting the company’s export pipeline capacities, but added that they will have to meet one condition — be “friends of Russia”.
Addressing the St Petersburg International Economic Forum on Thursday, Alexei Miller said Russia’s state-owned gas giant will remain “a provider of energy stability for friends of Russia”.
Miller added that Russian gas deliveries to China rose by 67% during the first five months of this year while they fell to European countries.
The Kremlin has designated 48 countries, including the European Union, the US and Canada as “unfriendly states” after they introduced sanctions against Russia and designated Russian corporations and individuals in response to the invasion of Ukraine in February.
Miller has acknowledged that technical issues at the Portovaya gas compressor on the Russian Baltic Sea coast have affected flows into the subsea segment of Nord Stream, which carries gas to Germany and other European countries.
However, he openly blamed Western countries for the situation, saying that sanctions against Russia and the trend towards gas market liberalisation in Europe have undermined the principles of long-term cooperation between Russia and the West.
According to Gazprom, Nord Stream has been shipping gas to Germany at the rate of 67 million cubic metres per day since 16 June, against its nameplate capacity of at least 167 MMcmd as just two out of eight turbines, powering compressor pumps, remain in service.
Miller said that one of the Siemens-manufactured turbines cannot be brought back to Portovaya from Canada, where it was overhauled, because of sanctions.
Another five turbines at the pumping facility were reported idle because they are broken or are in need of maintenance by Siemens Energy. The German engineering and manufacturing giant announced its full exit from Russia in response to the invasion of Ukraine, spurred also by public opinion at home.
No solution at Nord Stream
Miller said that he “does not see any solution” to resolve the repair and maintenance issues for the Portovaya turbines.
According to reports in Moscow, Russian industry is unable to manufacture or service turbines with the required power specifications.
A further decline in Russian gas supplies was reported on Wednesday in Italy, which is Gazprom’s second largest customer in Europe, after Germany.
Italian oil major Eni said on Friday that against a nomination of around 63 MMcmd, Gazprom “will only supply 50% of what was requested, with actual quantities delivered almost unchanged from yesterday”.
“Gazprom explained that the under-delivery is due to problems at Portovaya which feeds the Nord Stream gas pipeline, through which Gazprom transports part of the volumes destined for Eni,” a company spokesperson had told Reuters on Thursday.
On a visit to Kyiv on Thursday, Italian Prime Minister Mario Draghi was quoted by Bloomberg as saying: “We have been told the reason for gas cuts across Europe is technical but both Germany and us, and others, believe these are lies.”
Nominations missed across Europe
Slovakia’s state-owned gas importer, SPP, expects Thursday’s gas deliveries from Russia to be reduced by about 30%, but said the reduction “will have no impact on its customers”.
Slovakia receives Russian gas via the legacy network in Ukraine and an onshore pipeline connected to Nord Stream in Germany.
RWE, Germany’s largest power producer, said on Thursday that the company had seen restrictions to its gas supply from Russia in the past two days.
“As is known, RWE has only contracted very limited gas volumes from Russia,” an RWE spokesperson told Reuters.
Market sources said Gazprom informed Austria’s OMV, France’s Engie and Germany’s Uniper that their nominations will not be entirely fulfilled.
OMV said in a statement to Upstream: “Since there is currently a significantly lower demand, these volumes [from Gazprom] can be replaced by storage volumes and volumes from the spot market. Supply of our clients is ensured at the moment.”
With Gazprom refusing to increase gas supplies via Ukraine or resume the flow of the Yamal Pipeline in Poland and Germany — which would help offset Nord Stream shortfalls — spot gas prices for July deliveries jumped by 30% to €157 ($163) per megawatt hour during trading at Europe’s largest and most liquid TTF gas hub in the Netherlands on Thursday
Prices eased to €125 per MWh by end of the day but on Friday, spot prices rose by over 5% to above €131 MWh on reports of the halt of gas flows from Germany to France.
According to data from German transmission operators, remaining flows of gas from Nord Stream are being diverted via the Opal pipeline to central Germany and the Czech Republic, with little volumes being sent to France via the Nel pipeline.
Gazprom revenues intact
Miller said the apparent breakdown in economic and financial ties between Russia and Europe would not translate into loss of revenue for Gazprom, as the state-run company was not obtaining significantly higher prices for its curtailed exports.
Miller has predicted a new increase in gas prices in Europe in the second half of this year as liquefied natural gas cargoes are also drawn towards Asia, especially China where the demand for gas is expected to increase again after Covid-19 lockdowns.
He left an option for Europe to overcome its supply problems by the turbine issue of Nord Stream by pointing to the possibility of issuing quick approvals to Nord Stream 2 pipeline that was prepared to send gas to Germany last year, but was sanctioned after the war in Ukraine started.
“Nord Stream 2 has been filled by gas to the operating pressure” and is ready to start sending volumes, Miller said.
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