Market players in European gas hubs have shrugged off the latest attempt by the Kremlin to use natural gas supplies as a weapon to bend European states to its will following the military invasion in Ukraine.

Front month contracts for the spot market delivery of gas at the TTF gas trading hub —Europe’s largest trading — continued their decline on Monday, falling about 5% to €84 ($90) per megawatt after a European MEPs and the European Council agreed that EU member states will need to have their gas storage reserves filled to at least 80% capacity by November to avoid any gas crunch this winter.

Finland's reply

Finland has already responded after becoming the third country in Europe, after Poland and Bulgaria, to see Russian gas supplies halted.

Finnish gas importer and distributor Gasum reported that it had not accepted a contractual amendment demanded by Russian supplier Gazprom Export stating that payment be made indirectly in Russian currency via the opening of euro and ruble accounts with Gazprombank in Moscow.

Finland imports most of its gas from Russia but this accounts for 10% of the country's energy consumption. In 2021, Gazprom Export supplied about 1.5 billion cubic metres of gas to the country, or about two thirds of its total gas imports.

Finnish gas pipeline operator Gasgrid Finland said in a statement that it has arranged gas deliveries via an alternative route.

"The amount of gas needed by the Finnish gas market is imported through Balticconnector entry point in accordance with the nominations made by the market parties. Gasgrid Finland has directed gas imports in Balticconnector and the gas system is currently in balance," the statement said.

"It is highly regrettable that natural gas supplies under our supply contract will now be halted. However, we have been carefully preparing for this situation and provided that there will be no disruptions in the gas transmission network, we will be able to supply all our customers with gas in the coming months,” Gasum chief executive officer Mika Wiljanen said.

Finland has irritated the Kremlin by declaring its intention to become a Nato member following the Russian invasion in Ukraine, with Moscow halting its electricity supplies to the country earlier in May.

Finland finalises FRSU charter

To further strengthen its ability to move gas in and out the country, Gasgrid has also finalised a ten-year contract with US LNG player Excelerate Energy to charter a floating storage and regasification vessel (FRSU).

Excelerate will deploy its Exemplar FSRU to provide regasification services for liquefied natural gas, Gasgrid said.

The Exemplar FSRU hasan LNG storage capacity of 150,900 cubic metres and can provide more than 5 Bcm per year of regasification capacity.

In early May, Gasgrid Finland and Estonia’s gas transmission operator Elering stuck an outline agreement for the FSRU to be located in the Estonian port of Paldiski during the next European winter while Gasgrid works on the port and jetty infrastructure for the Exemplar in Finland.

Finland and Estonia are already linked by the Balticconnector pipeline, which is capable of moving gas in both directions between the two countries.

The Finnish FSRU initiative follows a spate of similar moves to establish or increase LNG import capacity in Poland, Germany, Italy, Greece, Holland and elsewhere.

Softly softly

Authorities in Germany and Italy have issued statements to reassure gas consumers that they may open euro and ruble accounts with Gazprombank in Moscow without falling foul of EU sanctions against Russia, serving to ease pressure on gas prices in Europe.

Germany and Italy are Gazprom’s biggest markets in Europe, with the company delivering over 50 Bcm of gas to Germany annually before the action and against Ukraine, and another 18.5 Bcm to Italy.

Governments in both countries anticipate that they will be capable of ending their Russian gas pipeline imports before the end of 2024.

Polish no to Yamal

Polish authorities have indicated that they do not expect to resume pipeline gas deliveries from Russia.

PGNiG, the state-owned company that produces and imports oil and gas terminated its long term agreement with Gazprom to receive Russian gas via the Yamal Pipeline, running from Russia across Belarus to Poland and Germany.

Polish Climate Minister Anna Moskwa told Warsaw-based PAP news agency that the termination does not mean the Yamal Pipeline will immediately become obsolete or halt operations.

“The Yamal Pipeline is functioning in line with the European law which allows it to be used for reverse supplies of gas from Germany to Poland without interruption," she said

Slovakia interconnector

Poland and Slovakia are also stepping up efforts to complete the construction of a 164-kilometre gas interconnector to link Poland’s pipeline network with Slovakia’s gas receiving hub Velke Kapusany, on its eastern border with Ukraine.

Velke Kapusany is used both for receiving Russian gas transit supplies from Ukraine and sending gas from European hubs into Ukraine.

Partially funded by the European Union, the construction of the Poland–Slovakia interconnector started in 2018 and is slated for completion later this year.

The interconnector will have the capacity of 4.7 Bcm per year in the direction from Poland to Slovakia and 5.7 Bcm per year in the direction from Slovakia to Poland, according to Slovakia’s transmission operator Eustream.

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