Tuesday, November 9, 2021

Nord Stream 2: gas shortage and uncertainty about Gazprom's plans

 While russian president Vladimir Putin ordered the gas producers to fill the gas reservoirs in Germany and Austria the concrete results are long time in the coming. This behaviour confirms some observers that this move is destined to coerce german authorities to issue the operating licence to Nord Stream 2. Read more in this WELT article

The energy consumers in Germany have to wait for the announced additional natural gas from Russia. Data from the network operator Gascade shows that in Mallnow, Brandenburg on the Polish border, where the Yamal pipeline from Siberia arrives, no Russian natural gas arrived at all by Monday evening, reports "Spiegel".

The Russian newspaper "Kommersant" also confirmed that Russian gas deliveries have so far only increased slightly. “Gazprom has started at a very moderate pace to implement Vladimir Putin's order to replenish European storage facilities from November 8th. Even though the company has pumped gas into the storage facilities again in the past few days, it has not significantly increased deliveries via Ukraine and has not yet resumed transport through the Yamal-Europe gas pipeline. "

After months of the energy crisis, gas customers in Europe were actually hoping for additional energy supplies from Russia as of the month of the month. It has been almost two weeks since Russian President Vladimir Putin, under pressure from rising prices and poorly filled storage facilities, instructed the state gas giant Gazprom to replenish the reserves in Germany and Austria. First the domestic supplies should be replenished. But then Gazprom should also open the valves for Europe further.

Russia's state media cheered that Putin was the “savior in the gas crisis” and was protecting the EU from the cold shock. On Monday, a spokesman for Putin confirmed that the order was in place for Gazprom to deliver more than the agreed mandatory quantities after November 8th. Ukraine, meanwhile, reported an increase in transit to Europe compared to the past few days. Accordingly, the daily amount rose to 88 million cubic meters of gas, most recently it was around 60 million cubic meters. There was initially no reaction from Gazprom.

The Federal Association of Energy and Water Industries had also welcomed Moscow's announcement. At the end of October, according to the association, the plants supplied by Gazprom in Germany were only 21 percent full, below average compared to other gas storage facilities.

Meanwhile, there is still great anger in Russia over allegations that the country is driving up prices by withholding gas. As Russia's most important woman in gas exports, Jelena Burmistrowa has just decidedly rejected responsibility for the energy crisis on the international stage. At a conference in Amsterdam earlier this month, the head of Gazprom-Export said anyone who “speculates about Gazprom's malicious acts” is far from reality.

Russia kept pointing out that there was a gas crisis around the world. The reasons lie in the recovery of the economy after the restrictions caused by the pandemic. There is a hunger for energy, especially in Asia. Last but not least, the US would have preferred to deliver additional liquefied gas there and not to Europe, said Burmistrowa.

Kremlin chief Putin had accused the Europeans of neglecting to properly fill their gas storage facilities after a cold winter. To make matters worse, because of the slack wind in the North Sea, the wind turbines produced less electricity there. More gas had to be converted into electricity. This also reduced storage reserves.

Nonetheless, Russia found itself exposed to political accusations in Germany and other EU countries that deliveries were in short supply in order to bring about the rapid commissioning of the finished Nord Stream 2 pipeline in the Baltic Sea. The Kremlin urged that Nord Stream 2 could ease the situation. But Moscow also stressed that regardless of this, all agreed quantities would be delivered. Customers in the West also confirmed that Russia delivers reliably.

It is not at all disputed that the raw materials giant is fulfilling its contracts. Rather, the point of contention is whether Russia is really doing everything it can to deliver additional quantities. Putin himself made it clear that there were limits for him. For example, Gazprom wants to do without Ukraine, which has long been the most important transit country for Russian gas deliveries to Europe.

The route through Ukraine is longer and therefore more expensive; In addition, the Ukrainian transmission network was ailing and could not withstand the higher pressure from the transit, explained Putin. Ukraine's offers to lower the fees came to nothing. The impoverished country urgently needs the income from transit.

As Vice President of Gazprom, Burmistrowa also stated at the Amsterdam conference that Russia was not interested in extremely high gas prices. The “record prices” could accelerate the transition to renewable energies in the EU. The huge empire, which is dependent on petrodollars, wants to earn money for its national budget with fossil fuels for a long time to come.

Putin spoke out several times in favor of a return to long-term contracts, because this would give Russia planning security for the development of new deposits. The gas price should therefore be linked to that for oil. Russia is also increasingly producing liquefied gas and can therefore react more quickly to acute situations. "In contrast to the flexible suppliers of liquefied gas, we are firmly bound to Europe through our pipeline system," said Burmistrowa.

The fact that the Nord Stream 2 pipeline, which was built for more than ten billion euros, has not yet been released for operation only triggers uncomprehending shaking of the head in Russia. 55 billion cubic meters of gas per year should flow to Europe in the future. A start date is not in sight.

Meanwhile, the Russians emphasize that in view of the gas crisis they have already delivered more than agreed. Exports to Germany alone increased by 30 percent in the first nine and a half months compared to the same period in the previous year, it said. Germany is the largest Gazprom customer in the EU. The country bought around 46 billion cubic meters of gas from Russia in 2020 - around a third of all consumption in Germany. Still, that's not enough.

However, there is no threat of a collapse in supply. Analysts believe that the storage facilities in Europe are still filled with around 82 billion cubic meters or 76 percent of active gas. That is about 15 percentage points less than the average for the past five years. The Gazprom storage facilities in Germany and Austria, the CEO Alexej Miller admitted during an interview with Putin, had hardly any gas left.

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