BREAKING NEWS: Nord Stream 1 gas flows to Europe to remain suspended indefinitely – Russia’s Gazprom

ICIS Editorial

02-Sep-2022

LONDON (ICIS)–Russian natural gas producer Gazprom announced abruptly late on Friday on that the Nord Stream 1 pipeline to Europe will not resume flows on 3 September as expected, citing equipment maintenance.

The announcement is set to push up prices across European hubs in the next trading session on 5 September, considering how Russian supply constraints have spurred price hikes in recent months.

Flows were poised to resume early on 3 September following a scheduled three-day maintenance at levels comparable to before the works. But Gazprom’s announcement, which came minutes after European gas markets had closed for the day, indicated no flows can be expected in the foreseeable future along the pipeline.

Nominations from the pipeline operator earlier on Friday had indicated flows to Germany via the link were set to resume at around 32 million cubic metres (mcm)/day on 3 September.

SUPPLY UNCERTAINTY

Uncertainty around the supply of Russian gas to Europe has escalated price shocks on the Dutch TTF in recent months.

“When it went offline on 31 August, Nord Stream 1’s 32mcm/day flows represented about 3% of total European supply. While a small amount, these molecules will need to be replaced by much more expensive methods – either drawing additional LNG from the global market or by destroying demand in Europe,” said Thomas Rodgers, gas markets analyst at ICIS.

This now leaves remaining Russian gas supply to Europe via Ukraine and TurkStream. As of 2 September, remaining Russian flows to Europe stood at around 75-80mcm/day, equating to about 7% of European supply, including LNG sendout. Total Russian flows this time last year were about 380mcm/day, more than a third of all supply to Europe.

TurkStream nominations at 12:30 CET showed that up to 44mcm/day could flow into Bulgaria from Turkey on 2 September.

The ICIS TTF October ‘22 contract price was assessed at €206.90/MWh ($60.92/MMBtu) on 2 September, a 17% drop from the previous day’s close.

The price fall was driven by the expected return of Nord Stream 1, high European gas storage fullness and expectations of strong LNG shipments to Europe.

OIL LEAK

Gazprom stated in a Telegram post on 2 September that during recent maintenance at the Portovaya compressor station, in combination with Siemens Energy, an oil leak was detected. The statement added that as the damage does not allow for safe operation of the gas turbine engine impacted, its operation has been suspended.

The statement cites information from Siemens Energy saying that elimination of the leak is only possible in a specialised repair facility.

The three-day maintenance was first announced on 19 August. In that occasion, Gazprom said on Telegram that flows would resume to 33mcm/day by the end of the works.

In reaction, the ICIS TTF front month rocketed to new all-time highs in the following sessions, gaining almost a third in value between 19-26 August. Ruth Liao and Kaja Sillett

Additional reporting by Aura Sabadus and Hal Brown

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