Globally rated Fitch Ratings has said that there will be further volatility in gas prices in Europe due to the 10-day shutdown of Russia’s main pipeline Nord Stream 1 for planned maintenance.
Nord Stream is a pair of offshore natural gas pipelines in Europe that run under the Baltic Sea from Russia to Germany. It includes the two Nord Stream 1 pipelines running from Vyborg in northwestern Russia, near Finland, and the two Nord Stream 2 pipelines running from Ust-Luga in northwestern Russia, near Estonia
Nord Stream 1 was shut down yesterday on for what the gas pipeline’s operators said is routine servicing. Aljazeera said however that German officials are suspicious about Russia’s intentions, particularly after Russia’s Gazprom last month reduced the gas flow through Nord Stream 1 by 60%.
There are concerns that Russia will use the opportunity to close it for good, because of Moscow’s standoff with western powers over its invasion of Ukraine.
If Russian gas flows from Nord Stream 1, a 1,224-kilometre pipeline under the Baltic Sea, do not resume, Fitch projects that there will be an “intensification of energy saving measures, higher prices and reduced production in some industries, especially in late autumn and during winter”, across Europe.
“We estimate that the shortfall in natural gas will not exceed 10% of annual European consumption, although the actual amount will depend on factors such as weather that are difficult to predict,” the rating agency said late yesterday.
“While the logic of gas rationing is embedded in local regulation, the details on the impact for specific issuers or the merit order for industries is more difficult to estimate,” it added.
Lower flows in one pipeline are usually balanced out by higher flows elsewhere, but that may not be an option this time “since flows of natural gas from Russia via Slovakia continue to be lower than earlier in 2022 and in 2021”.
Observers say a complete shutdown would add to Germany’s energy woes. Last month, Germany declared a gas emergency and called on people to save power, so that their lights will stay on in winter.
The move would also cause problems for other European countries, after modelling by German regulators said the country would have to curb its onward exports to countries such as Austria and the Czech Republic.
If Nord Stream 1 stops and Germany does not limit exports, even a 20% reduction in gas consumption for the rest of the year would leave the country short of energy, the modelling found.
State-owned Russian exporter Gazprom had already reduced delivery through Nord Stream 1 earlier this year, for what it claimed were technical reasons linked to compressor units.
Nord Stream 2, a parallel pipeline which was completed last year, never went online after German Chancellor Olaf Scholz suspended the project in February.
European gas demand in industry dropped 6% on an annual basis in the October-March period, according to energy watchdog the International Energy Agency. Demand is further anticipated to shrink by 9 per cent annually this year, the Paris-based inter-governmental agency said.
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