Europe races to cut Russian gas consumption amid new Putin warning

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  • Nord Stream 1 pipe out of service for maintenance
  • Pipeline resumes Thursday
  • EU says states must act now to reduce gas consumption
  • Germany, others have rationing and other plans

BRUSSELS/LONDON, July 20 (Reuters) – The European Union will draft contingency plans on Wednesday to curb gas consumption after President Vladimir Putin warned that Russian supplies shipped to Europe via the largest pipeline, Nord Stream 1, were at risk to be reduced further.

Deliveries through the pipeline, which accounts for more than a third of Russia’s gas exports to the EU, will resume on Thursday after a 10-day interruption for annual maintenance.

But supplies via that route had been reduced even before the maintenance shutdown due to a dispute over sanctioned parts, and now face further cuts, while supplies via other routes, such as Ukraine, have also fallen since Russia’s neighbor in February. invaded.

The disruptions have hampered Europe’s efforts to replenish gas supplies before the winter, raising the risk of rationing and another blow to fragile economic growth if Moscow further restricts flows in retaliation for Western sanctions over the war in Ukraine.

The European Commission’s plan will encourage countries to reduce gas consumption. A draft seen by Reuters proposed a voluntary target for countries to reduce gas demand over the next eight months, which could be made legally binding in an emergency.

EU officials said the target cut would be 10%-15%, with any plan requiring approval from members of the 27-nation bloc. But EU officials say it is vital to act now rather than wait and see what happens to flows through Nord Stream 1 or other routes.

“We believe a complete disruption is likely and it is especially likely if we don’t act and make ourselves vulnerable to it,” said one. “If we wait, it will be more expensive and that means we will dance to the tune of Russia.”

European politicians have accused Russia of playing political with its gas supplies and using technical problems as a pretext to cut supplies. The Kremlin says that Russia remains a reliable energy supplier and blames the reduced flows on sanctions.

Two Russian sources familiar with Russia’s export plans said flows through Nord Stream 1 were expected to restart in time on Thursday after being shut down for annual maintenance on July 11.

But they said it would fall below the capacity of 160 million cubic meters (mcm) per day.

Kremlin-controlled Gazprom (GAZP.MM) reduce gas exports via the route to 40% capacity in June, with delays attributed to the return of a turbine supplied by Siemens Energy (ENR1n.DE) was under maintenance in Canada.

FURTHER DISCOUNTS

That turbine, which had become mired in sanctions, was said to be on its way back this week, although Gazprom said on Wednesday it had not received documentation to reinstall it and said the return of the turbine and maintenance of other equipment was needed to ensure the maintain pipeline. walk safely.Putin suggested that supplies via the pipeline under the Baltic Sea to Germany, Europe’s economic powerhouse that relies heavily on Russian fuel, could further diminish via the pipeline that runs under the Baltic Sea.

Since the outbreak of the crisis in Ukraine, gas prices in volatile trade have skyrocketed. The gas contract for the first month climbed above 160 euros per megawatt hour (MWh) on Wednesday, 360% more than a year ago but below the March peak of 335 euros.

Putin said there were five gas pump units operated by Siemens Energy on Nord Stream 1 and another unit was faulty due to “crumbling of the inner lining”.

“There’s two working machines there, they’re pumping 60 million cubic meters a day… If one isn’t returned, another will come, that’s 30 million cubic meters. Does Gazprom have anything to do with that?” he said.

Putin said another of the gas pump turbines would be sent for maintenance on July 26.

He also said that Gazprom, which has a monopoly on Russian gas exports by pipeline, is not responsible for reducing gas throughput through a network of pipelines to Europe.

He accused Kiev of closing one route through Ukraine, although Ukrainian authorities attribute the closure to the Russian invasion.

Siemens Energy said turbine maintenance for the Nord Stream 1 would normally be a routine matter. It said it would continue to maintain equipment under sanctions if possible and where necessary, and would be up and running as soon as possible.

In a pivot east, Gazprom said on Wednesday that Russian gas deliveries bound for China via the Power of Siberia pipeline hit a new daily record. Moscow has expanded its capacity to supply China even as supplies to Europe dwindle, even though Russia’s far east is not connected to the European supply system.

European countries, meanwhile, are chasing alternative supplies, although the global gas market was stretched even before the crisis in Ukraine as demand for the fuel recovered from the pandemic-induced downturn.

Those efforts include seeking more gas from pipelined suppliers to Europe, such as Algeria, and building or expanding more liquefied natural gas (LNG) terminals to accommodate shipments from much further afield, such as the United States. receive.

Reporting by Reuters agencies; Written by Edmund Blair; Editing by Carmel Crimmins

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