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Gas price surge as Russia makes further supply cuts

22/6/2022

Nordstream 1 pipeline Photo: Nordstream 
Gazprom is cutting Nordstream 1 gas supplies to Germany to some 67mn cm/d, well under half the previous level, in a move that pushed up prices in the UK and Europe

Photo: Nordstream 

Gas prices surged in the UK and Europe last week as Russia announced it was planning to further limit supplies.

Gazprom was reported to be planning to reduce volumes transiting the Nordstream 1 gas pipeline to Germany to around 67mn cm/d, well under half the previous level. The state-controlled company cited the need to service Nordstream equipment as the reason, although Germany’s Economy Minister Robert Habeck told BBC News that it was ‘a political decision’ and not a technical one, and was ‘obviously a strategy to unsettle and drive up prices’.

 

Meanwhile Italian company Eni said that its supplies from Russia had also been reduced by 15%. Like Germany, Italy is heavily dependent on Russian gas, which accounts for some 40% of its gas imports.

 

UK wholesale gas prices jumped 30% on the news, reaching more than 257 p/therm. Prices had already risen by 28% just a day earlier, after Gazprom announced an initial cut to flows through Nordstream 1 and the owners of the Freeport LNG export terminal in Texas, US, reported that the facility would be out of action for longer than expected following a fire.

 

The cuts to gas supplies came just weeks after the European Union agreed to block most Russian oil imports by the end of 2022. Gazprom had already suspended supplies to Poland, Bulgaria, Finland, Denmark and the Netherlands after their refusal to pay for gas in rubles.

 

EBRD helps bolster Ukraine’s energy security
Meanwhile, the European Bank for Reconstruction and Development (EBRD) is to lend up to €300mn to the Ukraine gas company Naftogaz in a bid to boost the country’s energy security following the Russian incursion.

 

An initial €50mn is to be immediately available for emergency gas purchases, which are urgently needed to prepare Ukraine’s gas system for the next heating season. Naftogaz is looking to raise a total of €1bn to buy up to 1bn cm of gas, which is critical to ensure there is enough gas in the system by autumn and to safeguard access to services for people whose livelihoods and economic security are threatened by the war, reports the EBRD.

 

The EBRD says the loan forms part of €1bn of activity that it intends to undertake this year in Ukraine, in cooperation with donors and other partners, to support the country’s real economy. 

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