The biggest single pipeline carrying Russian gas to Germany starts annual maintenance on Monday, with flows expected to stop for 10 days, but governments, markets and companies are worried the shutdown might be extended due to the war in Ukraine.
A section of the Nord Stream 1 pipeline that carries gas from Russia to Germany. Photo: AFP / DPA
The Nord Stream 1 pipeline transports 55 billion cubic metres (bcm) a year of gas from Russia to Germany under the Baltic Sea. It will undergo maintenance from 11-21 July.
Last month, Russia cut flows to 40 percent of the pipeline's total capacity, citing the delayed return of equipment being serviced by Germany's Siemens Energy, in Canada.
Canada said at the weekend it would return a repaired turbine, but it also said it would expand sanctions against Russia's energy sector.
Europe fears Russia may extend the scheduled maintenance to restrict European gas supply further, throwing plans to fill storage for winter into disarray and heightening a gas crisis that has prompted emergency measures from governments and painfully high bills for consumers.
German economy minister Robert Habeck has said the country should confront the possibility that Russia will suspend gas flows through Nord Stream 1 beyond the scheduled maintenance period.
"Based on the pattern we've seen, it would not be very surprising now if some small, technical detail is found and then they could say 'now we can't turn it on any more'," he said at an event at the end of June.
German economy minister Robert Habeck is expecting a longer shutdown than previously announced. Photo: AFP
Kremlin spokesperson Dmitry Peskov dismissed claims that Russia was using oil and gas to exert political pressure, saying the maintenance shutdown was a regular, scheduled event, and that no one was "inventing" any repairs.
There are other big pipelines from Russia to Europe but flows have been gradually declining, especially after Ukraine halted one gas transit route in May, blaming interference by occupying Russian forces.
Russia has cut off gas supplies completely to several European countries that did not comply with its demand for payment in roubles.
"The last few months have shown one thing: [Vladimir] Putin knows no taboos. A complete halt to gas supplies through the Nord Stream pipeline cannot therefore be ruled out," Timm Kehler, managing director of German industry association Zukunft Gas, said.
Turbine trouble
Germany at the weekend welcomed Canada's decision to issue a "time-limited and revocable permit" to allow equipment to be returned for the Nord Stream 1 pipeline.
But Ukraine's energy and foreign ministries said in a statement they were "deeply disappointed" and urged Canada to reverse a decision they said amounted to adjusting the sanctions imposed on Moscow "to the whims of Russia".
Siemens Energy said it was working on further formal approvals and logistics to get the equipment in place as soon as possible.
Zongqiang Luo, gas analyst at consultancy Rystad Energy, said it was "not impossible" Gazprom could use any delay as a justification to extend the maintenance period.
In previous years, the annual maintenance period on Nord Stream 1 has lasted around 10-12 days and has finished on time.
It is not uncommon for additional faults to be detected during routine maintenance at pipelines or gas infrastructure and operators can prolong outages if necessary.
While a complete halt of gas was considered unlikely, Gazprom has not been re-routing flows via other pipelines, meaning a prolonged reduced flow rate was probable, analysts at Goldman Sachs said.
Multi-billion economic blow
Germany has moved to stage two of a three-tier emergency gas plan, which is one step before the government rations fuel consumption.
It has also warned of recession if Russian gas flows are halted. The blow to the economy could be 193 billion euros ($NZ317b) in the second half of this year, business analysis carried out in the state of Bavaria showed last month.
It said 5.6 million jobs could be affected.
The effects would be wider still. A complete halt would keep European gas prices, which have already stung industry and households, higher for longer.
Wholesale Dutch gas prices, the European benchmark, have risen more than 400 percent since last July.
"If Nord Stream gets cut off, or if Germany loses all its Russian imports, then the effect will be felt on the whole of north-western Europe," Dutch energy minister Rob Jetten said.
In an interview with Reuters on Thursday, he said the Dutch Groningen gas field could still be called upon to help neighbouring countries in the event of a complete cut off in Russian supplies, but ramping up production would risk causing earthquakes.
Meanwhile, a halt of supply through Nord Stream 1 would hurt Russia as well as western Europe because it would lose revenue.
In June Russia's finance ministry said it expected to receive 393 billion roubles ($NZ9.6b) in extra oil and gas revenues compared with the amount expected in its budget planning.
For July, it expects 259b roubles above its budget plan.
-Reuters
