Russian Gas Supply Cut Again... European Gas Prices Surge 44% in Two Days

Gazprom "Germany delays turbine repairs... Nord Stream supply reduction"... Germany points to "political reasons"

[Asia Economy Reporter Park Byung-hee] As Russia announced a significant reduction in gas supply to Europe for the second consecutive day, European natural gas futures prices surged 44.2% in two days.

According to major foreign media on the 15th (local time), the gas futures price at the Netherlands TTF exchange, which serves as the benchmark for European natural gas prices, rose 24.0% from the previous day to 120.3 euros per megawatt-hour (MWh). Following a 16.3% increase the day before, gas futures prices rose sharply for two consecutive days. On the 13th, gas futures prices were 83.4 euros per MWh.

Russian state-owned gas company Gazprom announced on the 14th and 15th that it would drastically reduce the supply through the Nord Stream gas pipeline under the Baltic Sea connecting Russia and Germany, raising concerns about gas supply shortages again.

On the 14th, Gazprom stated that the return of gas turbines entrusted to Siemens Energy in Germany for maintenance was delayed and announced a 40% reduction in gas supply. Gazprom explained that due to the turbine issue, only three gas transmission units are currently operating at the compressor station Portovaya, and the daily gas supply through Nord Stream will decrease from the previous 167 million cubic meters to 100 million cubic meters.

On the following day, the 15th, Gazprom announced that it had no choice but to suspend the use of one more Siemens gas turbine engine and would reduce gas supply by an additional 30% or more. Gazprom explained that due to the additional supply cut, the daily gas transmission capacity would decrease by 33%, from 100 million cubic meters to 67 million cubic meters, starting at 1:30 a.m. Moscow time on the 16th.

In response to Gazprom's supply reduction announcement, Siemens Energy stated that although the gas turbine maintenance was completed in Canada, it is impossible to return the gas turbines to Russia due to sanctions imposed by Canada on Russia.

Robert Habeck, Germany's Minister for Economic Affairs, pointed out that Gazprom's decision to reduce gas supply is not due to technical issues but political reasons. Minister Habeck added that the impact of this development on the European and German gas markets must be closely observed.

Ursula von der Leyen, President of the European Commission
Photo by Reuters Yonhap News

Since Russia's invasion of Ukraine, the European Union (EU), which is reducing its dependence on Russian gas, has been focusing on expanding imports of alternative liquefied natural gas (LNG). The Washington Post reported that the EU signed a tripartite gas agreement with Israel and Egypt in Cairo on this day. The three countries had been pursuing the gas agreement since March, and it came to fruition on this day. According to the agreement, Israel can liquefy natural gas at Egyptian ports and export LNG to Europe using the already constructed Egyptian gas pipelines. The EU has set a goal to reduce Russian gas consumption to two-thirds of the current level by the end of this year.

Following a visit to Israel the previous day, Ursula von der Leyen, President of the European Commission, who visited Egypt on this day, stated on Twitter, "This agreement will contribute to Europe's energy security." Karin Elharar, Israel's Minister of Energy, also issued a statement emphasizing, "This is a tremendous moment for Israel to grow as an important country in the gas market."

Israel has recently seen increased gas demand and rising prices, prompting efforts to expand gas production. It has announced plans to increase gas exports to Europe in cooperation with Middle Eastern countries.

Israel's annual natural gas production is about 12 billion cubic meters. Experts believe that if undeveloped gas fields are developed, Israel could double its gas production.

In 2021, the EU imported 155 billion cubic meters of gas from Russia, accounting for 45% of its total gas imports.

Meanwhile, on this day, the United States decided to provide an additional $1 billion (approximately 1.3 trillion won) worth of weapons to Ukraine, including howitzers and Harpoon coastal defense systems. This announcement was made as U.S. Secretary of Defense Lloyd Austin chaired the 'Ukraine Defense Contact Group' meeting in Brussels, Belgium, attended by over 40 countries. Secretary Austin said that besides the U.S., Germany pledged multiple rocket launcher systems, Slovakia pledged helicopters, and Canada, Poland, and the Netherlands promised artillery shells.

As Russia intensifies its offensive in eastern Ukraine, there are observations that the tide of the war is shifting in Russia's favor. Some in the West are cautiously suggesting that Ukraine may need to concede some territory and consider a ceasefire.

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