Gazprom may deliberately reduce gas supplies to the European Union

A further reduction in gas supplies via the Yamal pipeline has triggered a new record gas price on the European exchange reaching $570 per 1,000 cubic metres (46.6 euros per megawatt hour). Gazprom may be raising the price to maximise profit or to promote the disputed Nord Stream 2 despite the obstacles.

The decline in supplies through Yamal-Europe is the direct cause of another price increase, Kommiersant writes. Supplies via this pipeline dropped by 44 percent to 0.84 million cubic metres per hour due to a fault caused by a fire at the Urengoy plant.

The total drop in Gazprom’s deliveries to Europe was 6 per cent, or 30 million cubic metres per day. Gazprom Export argues that it complies with all requests for access to continuous supply using available capacities and routes, but some commentators accuse it of deliberately reducing gas supplies for either business reasons (to raise the price and maximise profits), or political reasons (to promote the fastest possible supply through the disputed Nord Stream 2 pipeline despite the regulatory restrictions and sanctions that have so far prevented it).

“It is not entirely clear whether the decline in supplies through Yamal-Europe is an absolutely forced step or part of Gazprom’s market strategy,” Kommiersant writes, without referring to political interpretations popular in Central and Eastern Europe. It admits that the processing of condensate to produce LPG, the supply of which has also been curtailed by Gazprom’s accident, is carried out together with the purification of natural gas so the two processes have been stopped together until the fault is fixed. Meanwhile, the affected Zapolarnoye field, with annual production of 130 billion cubic metres, is dedicated to covering peaks in demand.

Kommiersant tries to explain Gazprom’s action through the need to fill the Russian Federation’s storage facilities to their full capacity of 72.3 bcm from the current 60.6 bcm. However, this move would also coincide with Nord Stream 2’s promotion – Gazprom should then have free gas for Europe by October 15. Also then, the first line of Nord Stream 2 may be put into operation to send additional gas, and Europe will face high gas prices in winter and the inability to cover peaks in demand due to low stocks in its storage facilities, the Russian newspaper writes.

Ukraine’s gas pipeline operator is in no doubt.

“Ukraine continues to offer additional capacity, but Gazprom shows no interest,” writes GTSUA CEO Sergey Makogon on Facebook. “If Gazprom does not have additional gas for the European Union, why is it building Nord Stream 2 when it has gas pipelines in Ukraine at its disposal? If it has gas, but Gazprom does not want to supply more gas to the Union and is trying to maximise profit, is it a trustworthy supplier from the Union’s point of view?” he asks rhetorically.

By Martin Chomsky (photo: public domain)