Bloomberg | Bloomberg | Getty Images Russia is poised to temporarily shut down the Nord Stream 1 pipeline — the European Union’s largest piece of natural gas import infrastructure — for annual maintenance. The projects have sparked fears of further gas disruptions that would undermine the bloc’s efforts to prepare for winter. Some fear the Kremlin could use scheduled maintenance to turn off the taps for good. Summer maintenance work on the pipeline, which runs under the Baltic Sea from Russia to Germany, is scheduled to take place from July 11 to July 21. It comes as European governments scramble to fill underground storage with natural gas supplies in a bid to provide households with enough fuel to keep the lights on and homes warm through the winter. The EU, which receives about 40% of its natural gas through Russian pipelines, is trying to rapidly reduce its dependence on Russian hydrocarbons in response to President Vladimir Putin’s months-long offensive in Ukraine. We cannot rule out the possibility that natural gas transport will not resume afterwards for political reasons. Klaus Müller Head of Germany’s energy regulator Klaus Mueller, head of Germany’s energy regulator, told CNBC that Russia may continue to squeeze Europe’s natural gas supplies beyond the scheduled end of maintenance work. Gas is not expected to be transported through the pipeline once the annual inspection begins, the Bundesnetzagentur’s Mueller said, adding: “We cannot rule out the possibility that gas transportation will not resume afterwards for political reasons.” Analysts at political risk consultancy Eurasia Group agree. If supply “doesn’t come back after maintenance because President Putin is playing games or wants to hit Europe while it hurts, then the plan to fill gas storage by the end of the summer probably won’t work,” said Henning Gloystein, the energy director. . climate and resources at Eurasia Group, he told CNBC by phone. The Nord Stream 1 pipeline is majority owned by Russian gas company Gazprom. The state-backed energy giant did not respond to CNBC’s request for comment. A key concern for EU policymakers and the energy sector more broadly is that they “almost have no idea what’s going to happen” because most communications with Gazprom have now been cut, Gloystein said. Previously they were relatively open and frequent until May.
Winter offer prospects
Natural gas pipeline flows from Russia to Europe have been in focus in recent weeks given growing concerns about disruptions. Russia has cut its gas flows to Europe by around 60%, and it is not yet known when or if Nord Stream 1 gas flows will return to normal levels. Gazprom blamed the delayed return of equipment operated by Germany’s Siemens Energy in Canada for its reduced flows through the pipeline. Kremlin spokesman Dmitry Peskov previously claimed Russia was ready to supply gas to Europe, describing the situation as a “man-made crisis” created by Europe. German Economy Minister Robert Habeck and Chancellor Olaf Scholz are pictured during a weekly cabinet meeting on July 1, 2022. Picture Alliance | Picture Alliance | Getty Images German Economy Minister Robert Habeck rejected that claim, saying the Russian supply curbs are a “political decision” designed to unsettle the region and raise gas prices. Late last month, Germany moved to the second so-called “alert level” of its gas emergency plan. The measure means Europe’s largest economy faces a high risk of long-term gas supply shortages, but believes the market is still able to manage the disruption without the need for intervention. The Eurasia Group said that if Putin were to orchestrate a complete shutdown of natural gas supplies beyond the scheduled end of maintenance work on the Nord Stream 1 pipeline – in what Gloystein described as a “maximum economic war” scenario – Germany would likely was forced to proceed to level three of the three-stage natural gas emergency plan. At this level, Germany’s Bundesnetzagentur will have to decide how to distribute natural gas supplies nationally.
“A hotspot for the whole EU”
“Germany has become a hotspot for the entire EU,” Gloystein said. “Germany has the largest population in Europe, it is the largest economy, it is the largest consumer of natural gas, it is the largest single importer of Russian natural gas, and it has nine land borders. So what happens in Germany spills over into the rest of Europe.” Indeed, it is not only the German authorities who are deeply concerned about the prospect of further supply cuts. In Italy, the EU’s second-biggest buyer of Russian gas, the government said last week it was lending state-owned Gestore dei Servizi Energetici 4 billion euros ($4.2 billion) to buy gas to shore up reserves. Germany, Italy, Austria and the Netherlands have also said coal-fired plants could be used to compensate for a decline in Russian gas supplies. “That’s actually the reason why though … we think Russia will come back a little bit,” Gloystein said. “They want some negotiation in case the Europeans tighten sanctions further so the Russians can hit back with that.” Russian President Vladimir Putin attends the IX Forum of the Regions of Russia and Belarus via video link in Moscow on July 1, 2022. Michael Metzel | Afp | Getty Images Gloystein said that completely cutting off gas supplies through the Nord Stream 1 pipeline for the rest of the year seemed unlikely, especially since such a move would contradict Moscow’s own narrative. The Kremlin has previously argued that the current decline in supplies is due to “technical factors” and economic sanctions. Keeping at least some flows would also allow Russia to take advantage of high prices and retain the option of more drastic cuts later in the year, Gloystein said, possibly in retaliation for proposed Western oil or gas price caps. German grid data shows that in previous years, Russian gas flows through the Nord Stream 1 pipeline have returned by the end of July after summer maintenance work. Thomas Rogers, European gas analyst at energy consultancy ICIS, said he did not expect flows to be cut completely — and pointed to separate maintenance work that was completed in time. “We don’t currently see any resolution to the alleged compressor issues that have pushed NS1 flows to this low level, but we don’t expect a complete shutdown once this work is complete,” he told CNBC. “Recent work on the Turkstream pipeline bringing Russian gas to southeast Europe via the Black Sea and Turkey was recently completed on schedule and without further disruption.”
