EU Natural Gas Prices Surge Amid Pressure Over "Poland Gas Pipeline Shutdown"

Concerns Over Worsening European Gas Supply... Surges Over 22% Intraday
Germany "3% of Gas Demand Not Met," Economic Shock Expected to Be Significant

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] Russia's unilateral declaration to cut off gas supply through the pipeline passing Poland has caused European natural gas prices to surge by more than 20% again. Especially, Germany, which heavily depends on Russian natural gas, is expected to suffer significant economic damage, raising alarms over securing alternative gas supplies.

On the 12th (local time), the Dutch TTF exchange, a key indicator of European natural gas prices, saw natural gas futures prices soar by 22.05% during the day to 114.74 euros per megawatt-hour (MWh) compared to the previous day. This sharp rise was driven by the renewed gas supply crisis in Europe following Russia's announcement to halt gas supply through the pipeline passing Poland.

Robert Habeck, Germany's Vice Chancellor and Minister for Economic Affairs and Climate Action, said at a press conference, "Due to sanctions on Russian gas pipeline operators, 10 million cubic meters of gas per day will no longer be supplied, which is about 3% of Germany's total demand. This volume can be substituted, but supply prices are expected to rise further."

Earlier, the Russian government announced sanctions on 31 European gas pipeline operators, including Gazprom Germania, the German subsidiary of Russia's state-owned gas company Gazprom, and its subsidiaries. Notably, Europol Gaz, which operates the pipeline section passing through Poland, was also included in the sanctions, leading to a halt in gas supply to Poland.

Immediately after the announcement of the Russian government's sanctions, Gazprom declared it would stop using the Poland transit section of the Yamal-Europe pipeline supplying gas to Europe. Gazprom also reported that natural gas supply through Ukraine to Europe decreased by about one-third that day, blaming Ukraine for halting operations at key gas transportation facilities.

The German government's plan to increase gas storage to counter Russia's gas cut threat is also expected to face major setbacks. The sanctions on Russian gas pipeline operators have prohibited the storage of Russian gas, casting uncertainty over the operation of 47 gas storage facilities in Germany. Currently, about 40% of Germany's gas storage capacity is filled, and the government had previously announced plans to fill 90% of storage by December this year.

As Russia's resource weaponization pressure intensifies, Germany is making every effort to diversify its gas supply sources to reduce uncertainties in gas trade with Russia. Germany has already reduced its dependence on Russian gas from 55% at the beginning of this year to around 30%. The German government plans to cut annual Russian gas usage from 45 billion cubic meters to 30 billion cubic meters, replacing the remainder with liquefied natural gas (LNG) from the United States or the Middle East.

The German government is reported to have secured four LNG special vessels for alternative gas supply. Two of these vessels are planned to be connected to Germany's gas supply system by the end of this year, and the remaining two by May next year. According to the German government, this will enable a gas supply capacity of 32.5 billion cubic meters. Russian gas passing through Germany to Austria and other countries is expected to be replaced by LNG terminals to be installed in the Netherlands in the third quarter of this year.

This content was produced with the assistance of AI translation services.