Gazprom Keeps Europe on Tenterhooks

A month after the Kremlin promised to help Europe stabilize gas prices, Gazprom’s westbound export flows are as tight as ever, making European gas traders even twitchier.

President Vladimir Putin now says Gazprom will ensure it injects enough gas into European storage to meet contractual obligations this winter. But injections won't start until next week, even though the state gas giant refilled Russian stocks to target levels on Oct. 29. That lends more weight to critics' allegations that the restricted flows are designed to secure German approval of the Nord Stream 2 pipeline as quickly as possible, with Putin recently making it clear that Russia will increase supply once it gets the green light.

Gazprom’s exports to Europe and China totaled just 13 billion cubic meters, or 420 million cubic meters per day, in October, down 10% month on month and 25% year on year, according to Energy Intelligence calculations based on Gazprom data published on Nov. 1. That is the lowest monthly volume this year and the lowest October level in five years, even though exports to China have been rising. Gazprom produced 1.435 billion cubic meters per day in October, close to its 1.5 Bcm/d maximum, but made injections into domestic storage and Russian sales the priority.

Yamal, Ukraine Flows Down

The domestic pressures should ease in November, but exports are already lower. Supply via the 33 Bcm/yr Yamal-Europe pipeline across Poland to Germany stopped on Oct. 30, with the pipe instead used to reverse flow gas from Germany to Poland, and had still not resumed on Nov. 2. Gazprom booked 30 MMcm/d of Yamal-Europe capacity for November — the same as in October, but down from over 80 MMcm/d normally — and says it is covering buyer nominations and meeting contractual obligations. But exports are understood to be at the lower end of contract commitments as high hub-indexed prices prompt buyers to cut daily nominations and wait for lower prices.

Gazprom also cut flows via Ukraine to 57 MMcm/d on Nov. 1, according to the head of Ukrainian gas transmission system operator GTSOU, Sergiy Makogon. That compares with 86 MMcm/d in October and is well below transit capacity of 109 MMcm/d. In addition, Turk Stream flows to Romania, Serbia and Hungary were suspended on Nov. 1 after a pipeline rupture in Bulgaria, which hosts part of Turk Stream’s onshore section.

With the restricted flows increasingly seen as a tactic to win speedy Nord Stream 2 approval, the US is calling on Berlin to go as slowly as possible to ensure Gazprom uses the Ukrainian transit route this winter.

Russian Energy Weapon

US Senior Adviser for Global Energy Security Amos Hochstein said last week it’s hard to argue against accusations that Russia is using energy as a weapon in the current gas crisis.

Many suspected Gazprom of doing this in difficult talks over a new gas contract with Moldova, which ended on Oct. 29 after Moldova secured a lower price in a new five-year deal. Gazprom had reportedly wanted Moldova to rethink pro-Western policies and get closer to Russia to win a better deal, but Moldovan President Maia Sandu denied this formed part of talks in an interview with Russia’s Kommersant newspaper on Nov. 1.

Moldova, which announced a state of emergency during the negotiations, secured a price formula that reportedly includes a linkage to oil products and gas hub indexes. Deputy Prime Minister Andrei Spinu, the chief negotiator, said the price could drop to around $450 per thousand cubic meters ($12.50 per million Btu) in November and potentially $400/Mcm in December from $790/Mcm in October.

Gazprom had insisted that Moldova repay an historic debt of $709 million, including fines, before signing a new contract — similar to tactics it used with Ukraine several years back. But Moldova convinced Russia to audit the debt and agreed to sign a deal before May 1, 2022, spreading repayments over five years.