Shutdown of Nord Stream could cause further rise in gas prices

“Gazprom“completely stopped the operation of the Nord Stream gas pipeline due to a malfunction found in the turbine during routine maintenance, the company’s press service reported.

The decision was made after maintenance of the Trent 60 gas compressor unit (GCU) at the Portovaya compressor station. When carrying out routine maintenance together with representatives Siemens the unit has oil leakage at the terminals, cable connections and other places. “The oil leak detection act was also signed by representatives of Siemens,” the press service said.

Gazprom noted that Rostekhnadzor warned the company that the identified malfunctions did not allow “to ensure safe trouble-free operation of the gas turbine engine,” and therefore it was necessary to suspend its operation.

Similar oil leaks have been found previously at several other GPUs that are now also idle, as Siemens said the leaks could only be repaired at a repair facility.

“A letter regarding the identified faults of the Trent 60 (No. 24) and the need to correct them has been sent to the President and CEO of Siemens Energy AG, Christian Bruch. Until the comments on the operation of the equipment are eliminated, the transport of gas to the Nord Stream gas pipeline has been completely stopped,” Gazprom said in a statement.

On August 31, Gazprom stopped the only gas pumping unit that worked at Portovaya for scheduled repairs. In the absence of technical malfunctions, it was planned to resume pumping on September 3rd.

The remaining six units were stopped earlier, one of the turbines was taken to Canada for repairs. At first, this turbine was refused to be returned to Russia due to sanctions, then Ottawa agreed to give it to Germany. Gazprom never agreed to accept the turbine due to the legal uncertainty associated with the sanctions.

According to the European Network of Gas Transportation System Operators (ENTSOG) and Vedomosti’s calculations, after the shutdown of Nord Stream for preventive work, the total export of Russian gas to the EU fell to 85-87 billion cubic meters. m per day, of which about 42.3 billion cubic meters. m comes through the territory of Ukraine, and 45 billion cubic meters – through the “Turkish Stream”. Transit through Ukraine is carried out only through the Sudzha gas measuring station (GIS), applications for pumping through Sokhranivka are rejected by the Ukrainian side.

The force majeure stop of the Nord Stream will be a negative factor for the energy market and EU energy security, even under conditions filling European UGS facilities by 80%, said Maria Belova, research director at Vygon Consulting. She stressed that in addition to the problem of filling the storage facilities, there is also the current gas consumption, which depends on daily supplies from the Russian Federation. The expert noted that the 33 million cubic meters that fell due to the shutdown of the Nord Stream. m per day will have to be taken from UGS facilities, and this will lead to the fact that gas extraction from storage facilities may begin much earlier than usual.

Belova stressed that if it is impossible to resume exports through the Nord Stream, it is possible to increase the volume of pumping only through the territory of Ukraine, since the Turkish Stream is already operating at maximum capacity.

The maximum pumping in two available directions does not exceed 85 million cubic meters. m per day, which implies a decrease in available capacity by almost 28%, said a senior analyst “Alfa Bank» Nikita Blokhin. He stressed that there is no need to talk about a significant decrease in supplies in absolute terms now, since in the last month, exports via Nord Stream did not exceed 33 million cubic meters. per day – the level provided by one of the six key GPAs at the Portovaya CS. “With the failure of the last of them, pumping may decrease by 1 billion cubic meters. meters per month is not such a significant loss, given the reduction in exports by 37.4% over eight months (more than 49 billion cubic meters),” Blokhin said.

However, according to the analyst, this could be a significant blow to consumers in Germany, where more than half of the gas exported via Nord Stream is supplied.

The market will react to the shutdown of the Nord Stream by increasing prices, believes Alexei Grivach, Deputy Director General of the National Energy Security Fund. “Although these volumes are not critical right now, in general, for the EU, which is in an energy crisis, this heating season, every cubic meter and every kilowatt-hour will count,” he believes. If the problem with supplies from Russia is not resolved before the start of the heating season, the situation with energy security in Europe will continue to deteriorate, and the upward trend in prices will intensify, the expert says.

Pavel Ikkert, managing partner of the Ickert & Partners law firm, believes that in the event of litigation, if initiated by Gazprom’s consumers, the current situation can be interpreted as force majeure. It, he explained, arose not through the direct fault of Gazprom as a gas supplier, but is a direct consequence of the sanctions and their complex interpretation.

The lawyer explains that the suspension of supplies was caused by a technical malfunction that arose due to the lack of timely repairs, which must be carried out within the framework of the obligations assumed by the equipment supplier – the company Siemens. “If it weren’t for the sanctions, then consumers could objectively demand a penalty from Gazprom, but in a situation of sanctions rhetoric it would be difficult for them to present anything, since the company objectively made and undertook all possible attempts to carry out repair work, but they were denied due to -for fears of partners to violate EU sanctions,” says the lawyer.