Norway refused to reduce the price of gas for the EU

Norway will not reduce the price of natural gas for importers in the European Union (EU), Kingdom Minister for Petroleum and Energy Terje Åsland told the Norwegian newspaper E24 on August 26.

The official stressed that the companies operating on the Norwegian shelf “are operating on a commercial basis”, and the country’s government will not impose contracts on the export of gas at below market prices to businesses.

Osland stressed that about 20 years ago, the EU leadership began to gradually abandon long-term contracts in favor of the spot market. And he added that in the current situation, Norway “reserves the opportunity to allow companies to enter into such contracts, based on economic interests.”

On August 18, the Financial Times wrote that leading EU gas importers believe that to combat the energy crisis, Norway should be supplied with gas at below market prices. At the same time, Russia has repeatedly stated that it is a supporter of long-term contracts, with minimal dependence on spot quotes. Russian President Vladimir Putin, as part of the SPIEF 2022 forum, emphasized that Russia exports gas to the EU at prices “five times below the market”. In particular, the price of a long-term contract for the supply of Russian gas to Moldova before the transfer to the principles of spot pricing (until November 1, 2021) was only $450 per 1,000 cubic meters. m.

Attempts by the EU countries to reduce dependence on Russian energy resources intensified after the volume of Russian gas supplies began to fall sharply. This happened against the backdrop of the start of the NWO in Ukraine, which led to the strengthening of anti-Russian sanctions and the introduction of counter-sanctions by the Russian Federation. According to Gazprom, over 7.5 months, gas exports to non-CIS countries (these are mainly the EU, Turkey and China) fell by 36.2% compared to the same period in 2021, to 78.5 billion cubic meters. m. supplies to China for 7 months of 2022 grew by 60.9%, the company reported.

According to the European Network of Gas Transportation System Operators (ENTSOG) and Vedomosti calculations, August 25 “Gazprom» exported to the EU about 118.3 million cubic meters. m of gas (42.2 million through Ukraine, about 32.9 million through Nord Stream and about 43.2 million m3 through Turkish Stream) versus 439 million m3. m for the same date last year. Spot gas prices in the EU are confidently moving towards historical highs set since the start of the NCO in early March. On Friday afternoon, August 26, TTF quotes broke through another psychological mark of $3,500 per 1,000 cubic meters, according to ICE data.

The price rally is provoked, among other things, by the shutdown of Nord Stream from August 31 to September 2 for maintenance of the last operational gas compressor unit at the Portovaya CS.

Each EU country solves the problem of abandoning Russian energy resources in its own way. In particular, Germany, which annually imports about 140-142 billion cubic meters. m of gas, relies on liquefied natural gas (LNG): in early May, Berlin signed contracts for the charter of four floating LNG terminals, and on the horizon until 2025 it intends to put into operation German LNG Terminal in Brunsbüttel (capacity – 8 billion cubic meters) and LNG Stade in Stade (5–8 billion cubic meters per year). Spain is the largest LNG re-exporter in the EU. At the end of 2021, the country imported about 13.8 million tons (19 billion cubic meters) of liquefied gas. Now it is considering the possibility of building gas pipelines from Catalonia to France with a capacity of 7.5 billion cubic meters. m per year (the project was frozen since 2019, began to be discussed again in 2022) and from Barcelona along the bottom of the Mediterranean Sea to Italian Livorno with a capacity of 30 billion cubic meters. m per year.

Poland, which terminated a long-term contract with Gazprom for the purchase of pipeline gas on May 23, 2022, is counting on the supply of Norwegian fuel through the Baltic Pipe gas pipeline with a capacity of about 10 billion cubic meters. m per year, its launch is scheduled for October 2022 (Vedomosti wrote about this on June 8).

On August 26, a new gas pipeline connecting Poland and Slovakia was launched. The symbolic launch ceremony took place in the town of Strachoczyna with the participation of the Prime Ministers of Poland and Slovakia, Mateusz Morawiecki and Eduard Heger. According to ENTSOG, the southern part of the gas pipeline connects to the Slovak gas distribution station Velke Kapusany, the entry point for Russian gas transiting through the Ukrainian GTS. Heger noted that due to this gas pipeline, Slovakia will be able to receive gas from Norway or by sea through Polish ports.

The construction of a gas pipeline from Poland to Slovakia has been underway for the past four years, and its idea as part of the North-South gas pipeline system (a gas corridor designed to connect the gas transportation systems of Eastern Europe) originated in the early 2000s against the backdrop of the first problems with transit Russian gas through Ukraine, recalled Maria Belova, director of research at Vygon Consulting. She clarified that about 5 billion cubic meters can be supplied through the new gas pipeline. m of gas per year and about 6 billion cubic meters. m – from Slovakia to Poland. According to the analyst, before the start of the NWO, Poland planned to become a gas hub, providing its needs with cheap gas from Gazprom and reselling non-Russian LNG and pipeline gas supplied to the country to other countries. “For this, Warsaw lacked the infrastructure. The construction of a new pipeline solved this issue, now Poland is physically able to redirect, in particular, Norwegian gas to Slovakia,” she argues.

It may take several months to fill the new gas pipeline and put it into operation, Nikita Blokhin, senior analyst at Alfa Bank, believes. “At the same time, it is naive to expect that the interconnector will reach full capacity in the Slovak direction before the launch of Baltic Pipe,” he believes.

The current energy crisis is largely driven by the EU’s goal of ditching Russian gas at all costs, Belova says. But this, according to the analyst, is “an exclusively political decision”, therefore gas exporters interested in maintaining market mechanisms, in particular Norway, have already declared their unwillingness to supply gas to the EU at prices below the market. “Ultimately, this will be a test of European solidarity,” she concluded.