On Wednesday, The European Union asked member states to cut gas usage by 15% until March as an emergency step after President Vladimir Putin warned that Russian supplies sent via Nord Stream 1 could be reduced further and might even stop.
Nord Stream 1 accounts for more than a third of Russian gas exports to the EU. Supplies via Nord Stream 1 resumed on Thursday after a 10-day halt for annual maintenance. Supplies via the route had been reduced even before the maintenance outage, due to a dispute over sanctions. Russian state-owned Gazprom cut gas exports to 40% capacity in June, linking delays to a turbine that Siemens Energy was servicing in Canada. Supplies via other routes like Ukraine have also dropped after the Russian invasion. Putin blamed Kyiv for closing one route via Ukraine, while Ukraine’s authorities blame the shutdown on Russia’s invasion. European politicians say Russia is using technical issues as an excuse to cut deliveries. “Russia is blackmailing us. Russia is using energy as a weapon. And therefore, in any event, whether it’s a partial, major cut-off of Russian gas or a total cut-off of Russian gas, Europe needs to be ready,” EU Commission President Ursula von der Leyen said.
Gas prices have surged since the Ukraine crisis erupted. The front-month gas contract went above 160 euros per megawatt hour (MWh) on Wednesday, 360% up than a year ago though still below than the March peak of 335 euros. The rise has triggered bankruptcies amongst utility companies. In Germany, the government plans to inject billions of euros into Uniper, the country’s biggest buyer of Russian gas. The global gas market was stretched even before the Ukraine crisis, as demand recovered from the downturn caused by the pandemic.
EU states are trying to ensure their storage facilities are 80% full by November 1, from the current level of about 65%. They are seeking more gas from suppliers connected to Europe by pipeline, such as Algeria, and by expanding more liquefied natural gas (LNG) terminals to receive shipments from further afar, like the United States.