Russia has exacerbated the shortfalls in European natural gas supplies that have driven prices to 13-year highs by quietly limiting increased sales to customers, according to executives and analysts.
Pipeline natural gas exports from Russia’s state-backed monopoly Gazprom to continental Europe fell by nearly a fifth in 2021 over pre-pandemic levels despite a sharp rebound in demand and falling stocks of the critical fuel. The imbalance helped push prices in Europe to their highest levels since 2008, driving up energy costs for homes and businesses.
The price hike comes during a period of volatile relations between Russia and the West. On Wednesday, Russia said its forces had opened fire Warning shots In a British destroyer off the coast of Crimea, the UK’s allegations were denied. Meanwhile, Germany and France this week sought to de-escalate tensions with Russia, proposing The new European Union plan In order to share closer with Moscow.
Energy industry executives and analysts said that while Gazprom was meeting its long-term contractual obligations, its reluctance to increase supplies to Europe through more immediate measures such as spot market sales was putting pressure on the market.
“Gazprom is only trying to maximize its profits at a time when spot prices are high, gas storage is empty, and demand for LNG in Asia is strong,” said an executive at a German energy company. “They are just opportunists.”
Gazprom said in a statement that it “precisely supplies gas in line with consumer demands.” “It’s based on those very requests, as well as wallet capacity optimization capabilities, as the company books transfer capacity in certain directions,” she added.
Several industry participants said Gazprom’s moves appear designed to support prices and may be aimed at pressuring EU governments to agree to them The controversial Nord Stream 2 pipeline to Europe.
“Gazprom is actually telling the EU: ‘Give us the green light for Nord Stream 2 and we’ll send you all the gas you need,'” said Tom Marzik Manser, senior European gas analyst at ICIS.
“No, and we won’t. We won’t send the extra gas through Ukraine and I’ve seen what that means for wholesale prices in a tight world [liquefied natural gas] market “.
Nord Stream declined to comment.
The Nord Stream 2 pipeline, which is nearly complete, has faced financial and legal sanctions from the United States and opposition from Eastern European countries, which argued it would increase Russia’s influence over the continent’s energy supplies.
The pipeline that runs through the Baltic Sea directly to Germany,
It also bypasses Ukraine, which relies heavily on gas transit fees رسوم
Russia to support its economy. Russia supported a proxy war in
The eastern region of Ukraine since 2014, when Moscow annexed Crimea.
Germany has been a long-term supporter of Nord Stream 2. It is set to agree to start up the pipeline later this year after the Biden administration. I waived additional penalties against the pipeline operator in a tacit admission that Washington was unable to prevent its completion. But the German elections in September may strengthen the Green Party, which opposed the pipeline.
Ronald Smith, a senior oil and gas analyst at BCS in Moscow, said: “Gazprom appears, we must say, in no hurry to volunteer additional non-contracted services. [gas supplies] through Ukraine.
Murray Douglas, of consultancy Wood Mackenzie, said he was surprised that Russia did not start increasing exports through Ukraine earlier this year, but said Gazprom’s position may be more accurate.
“In the years before Covid, Gazprom was building market share in Europe and providing what was needed, but sending large volumes through Ukraine today may be more complicated,” he said.
Analysts said Gazprom’s stance was not the only reason for the price hike, but it doubled the price. A cold winter has depleted the amount of natural gas stored in Europe to its lowest level in nine years, while demand from utilities to burn natural gas instead of coal has been boosted by higher EU carbon allocations to over €50 per ton.
Global gas supplies are tight, with more LNG shipments sailing to Asia rather than Europe. But Russia is seen as the only country with enough spare production capacity to quell the rise.
Analysts say limiting sales in the spot market is a quiet deviation from Gazprom’s past practices of providing gas as much as customers want it to. Russia’s strategy may evolve to become more like OPEC, the cartel of oil producers with which Moscow has cooperated since 2016 to manage oil supplies and support prices.
Elena Burmistrova, General Director of Exports at Gazprom, last month denied that there had been a change in strategy, but acknowledged that there were orders for additional volumes. It said in May that the company would be “able to provide additional demand” through “the launch of the Nord Stream 2 gas pipeline”.
ICIS’s Marzec-Manser said his view was that Gazprom was “taking advantage of the global supply situation to try to get the result you really want”.
They could have already solved this problem but they chose not to. It’s hard to argue that the extra cost of shipping through Ukraine is too high when the prices are so high. It makes people in the industry realize that there is something more strategic at play.”
Additional reporting by Henry Foy in Moscow and Natalie Thomas in Edinburgh