Nord Stream 2 Launch May Not Boost Gas Supplies

Copyright © 2021 Energy Intelligence Group

Gazprom says one of the two parallel lines of its controversial Nord Stream 2 gas pipeline from Russia to Germany is almost ready to start commercial operations, but that this won't boost its exports to Europe for the rest of this year. The Russian gas giant says it is still targeting total exports of 183 billion cubic meters for this year, up from some 175 Bcm in 2020. That figure will remain unchanged, regardless of when Nord Stream 2 starts to deliver gas. The European gas market has been tight this summer, with spot prices hitting record highs due to various factors such as low gas storage volumes, limited LNG imports and what appears to be a deliberate Gazprom policy of restricting supplies. Many market players had been expecting the launch of new Nord Stream 2 capacity to mitigate some of the recent upward pressure on gas prices, but Gazprom is now indicating that won't be the case (IOD Aug.19'21). "The 183 Bcm figure remains unchanged regardless of the changes in flows," Alexander Ivannikov, head of Gazprom’s finance department, said during an earnings call with analysts and investors on Tuesday. Gazprom reiterated that Nord Stream 2 could ship 5.6 Bcm of gas by the end of this year, but Ivannikov said that won't have a significant impact on the full-year export target. Ukraine May See Lower Transit Ivannikov's remarks suggest instead that Gazprom simply plans to redirect volumes away from other pipelines, most likely resulting in lower volumes shipped via the transit route through Ukraine. Gazprom has been reluctant to book additional transit capacity via Ukraine at monthly auctions this year, despite high European demand for gas. Many have interpreted this as a deliberate effort to keep European gas prices high and convince regulators that the EU needs Nord Stream 2 to ensure security of supply. For September Gazprom has only booked a marginal 650,000 cubic meters per day of additional firm transit capacity. This means that from Wednesday Gazprom is likely to reduce Ukrainian transit volumes to around 110 MMcm/d under a five-year transit contract, compared with around 124 MMcm/d in August and other recent months. The 55 Bcm/yr Nord Stream 2 pipeline will double Gazprom's export capacity via the Baltic Sea route, posing risks to Ukraine's future as a transit country for Russian gas. That's a key reason why the US and the EU have opposed the project and argued that it will undermine Europe’s energy security. Commissioning in Final Stages Gazprom appears to be targeting the launch of one of the two Nord Stream 2 lines first and the other later. Construction of the first line was completed in June, and it is now in the final stages of commissioning work, which will enable it to start commercial gas shipments, said Gazprom official Alexander Karimov. Construction of the second line is almost complete too, but it will have to undergo the same commissioning procedures, he added. Although the pipeline is almost ready from a technical point of view, there is still some uncertainty around its compliance with EU gas market regulations (IOD Aug.25'21). But Karimov said Gazprom was doing everything in its power to start Nord Stream 2 operations as soon as possible. Gas Production Target Raised While its export target remains unchanged, Gazprom has raised gas its gas production guidance for this year to a 10-year high of more than 510 Bcm this year -- up from previous guidance of 506.5 Bcm for this year and actual production of 453.5 Bcm in 2020. Ivannikov said an Aug. 5 fire at the Urengoi gas condensate treatment plant in West Siberia will not have much impact on Gazprom's output of condensate, which is expected to amount to 16 million tons this year -- little changed from the 2020 level of 16.3 million tons. The Urengoi fire led to lower gas exports via the Yamal-Europe pipeline for more than two weeks. Volumes were restored to pre-blaze levels on Aug. 23, but they remain lower than in late July just before Gazprom decided to reduce them -- apparently as part of its plans to restrict supplies to Europe (IOD Aug.24'21). Vitaly Sokolov, Moscow

Norway's new center-left government has pledged to develop the country's oil and gas industry, rather than dismantling it.
Fri, Oct 15, 2021
US crude’s march above $80 has left many wondering how short-cycle shale suppliers might respond. Energy Intelligence examines the factors in play.
Fri, Oct 15, 2021
Equity investors are taking notice of 13-year-high gas prices as the market tightens and Haynesville producers are among the likeliest to benefit.
Fri, Oct 15, 2021