Triple blow to European gas supply causes prices to rise

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Italian energy giant ENI said on Wednesday that Gazprom, the Russian state gas producer, would cut its supplies by 15%. The company did not know the reason, an ENI spokesperson told CNN Business.

The news comes on the same day that Gazprom said it was shutting down flows through its Nord Stream 1 pipeline – a major artery connecting Russian gas to Germany – and a major producer of liquefied natural gas (LNG) for the second time in two days. the United States said it would remain offline until September.
On Tuesday, Gazprom said it would reduce gas deliveries through Nord Stream 1 by 40% because Siemens Energy had delayed the return of turbines needed to make repairs to the pipeline. Then on Wednesday, Gazprom said it would reduce its inventories by another third to 67 million cubic meters from Thursday.

Siemens had taken the turbines to one of its Canadian plants for maintenance. It said in a statement Tuesday it was “impossible” to return the equipment to Russia because of sanctions Canada had imposed on the country over its invasion of Ukraine.

ENI confirmed to CNN Business that it is not receiving gas through the Nord Stream 1 pipeline.

European gas futures prices rose more than 20% to €120 ($125) per megawatt-hour (MWh) on Wednesday afternoon, according to data from the Intercontinental Exchange, although prices have since fallen slightly to about €113 ($117) per MWh.

Robert Habeck, Germany’s economy minister, said Gazprom’s decision was “political” and not “technically justifiable.”

“We’ll have to wait and see how this will affect the European and German gas markets,” he said at a news conference on Wednesday.

Habeck said in a statement that Gazprom is deliberately upsetting the apple cart.

“Current reports clearly show that the justification on the Russian side is just a pretext,” he said. “It’s clearly a strategy to distort and push prices up.”

Europe has been trying to cut imports of Russian natural gas since Russia invaded Ukraine in late February. It has set a target of cutting Russian gas consumption by two-thirds by the end of the year, and has rapidly ramped up imports of LNG as a substitute.

But major producer Freeport LNG said Tuesday it would close its Texas plant for 90 days after a fire broke out last week, and it would only be partially operational until the end of this year. It had previously said the factory would close for at least three weeks.

According to analytics firm Vortexa, Freeport has produced about one-fifth of US LNG exports so far this year.

In recent weeks, Gazprom has stopped supplying gas to Poland, Bulgaria and Finland and to energy companies in Denmark, Germany and the Netherlands, over their refusal to comply with the requirement to be paid in rubles.

But some European companies, including ENI, have tried to find a solution. The company said last month it had begun opening two accounts with Gazprombank, one in euros and another in rubles.

Corrected: An earlier version of this article gave an incorrect estimate of Freeport’s share of the LNG market.



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