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Gazprom Restores Gas Flows to Europe

Copyright © 2021 Energy Intelligence Group

Russia's Gazprom has restored export flows via the Yamal-Europe gas pipeline more than two weeks after a fire at a condensate treatment plant in West Siberia forced it to reduce supplies (LNGI Aug.12'21). Flows increased to 55.6 million cubic meters per day on Monday and were running around 2.8 million cubic meters per hour or some 66 MMcm/d on Tuesday. That was up from around 35 MMcm/d for the previous several days and it put volumes back to where they had been in early August, before the fire at the Urengoi condensate treatment plant. Yamal-Europe flows fell to 35 MMcm/d immediately after the Aug. 5 fire from 50 MMcm/d previously, and then fell below 25 MMcm/d for almost a week. The recovery to the levels seen before the fire should relieve some of the pressure on a tight European market. But flows are still lower than the more than 80 MMcm/d seen in late July, before Gazprom decided to slash them. Many saw the reduction in late July as a deliberate move by Gazprom to restrict supply and keep prices high, although the company denied this. European spot prices have hit record highs recently, because of lower supplies from Gazprom via Ukraine and later via Yamal-Europe. Low storage volumes in Europe and limited LNG supplies -- because of higher prices in Asia -- have also put upward pressure on prices. Gazprom added to the pressure on prices by drawing down storage volumes in Europe to compensate for the reduced flows via Yamal-Europe. However, spot prices did dip somewhat at the end of last week amid speculation that Gazprom's controversial new Nord Stream 2 pipeline to Germany may be close to start-up (LNGI Aug.19'21). Nord Stream 2 Nears Completion The launch of Nord Stream 2 will reduce pressure on the tight European market. And many believe Gazprom may have deliberately restricted supply recently to underscore the importance of the new pipeline and make sure the European Union does not take any action that would hinder its launch and subsequent operations. Other possible motives for Gazprom's recent actions are a desire to gain the upper hand in gas transit talks with Ukraine and maximize revenue from higher export prices. Construction of the 55 Bcm/yr Nord Stream 2 pipeline is expected to be completed by Sep. 12, according to a recent notice issued by the German maritime agency. The Fortuna pipelaying vessel completed work on the Danish section of Nord Stream 2 at the weekend and moved to German waters to complete the last remaining section there. A new round of US sanctions on vessels and shipowners involved in the project does not seem to be stopping construction work from proceeding. Commissioning work and pipe certification is still required before Nord Stream 2 can start operations, but it does now seem highly likely that it will do so this year. Gazprom has said it could supply 5.6 Bcm via the new pipeline by year's end. Merkel Hears Ukraine's Concerns German Chancellor Angela Merkel told Ukrainian President Volodymyr Zelenskiy in Kiev on Sunday that she understood his concerns about the Ukraine losing gas transit revenues as a result of Nord Stream 2 starting up. She reiterated that Russia could face further sanctions if Russia uses energy as a weapon against other countries, as agreed last month by Germany and the US. Zelenskiy has been pushing for firm guarantees that Kiev won't face a sharp drop in transit revenue after its current contract with Gazprom expires at the end of 2024. Among other things, Merkel said Ukraine will have to prepare for the loss of gas transit revenue in the longer term because Europe plans to significantly reduce its consumption of gas as it shifts to low-carbon energy. Vitaly Sokolov, Moscow

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