Sign up now for FREE unlimited access to Reuters.comSign up

The price of European natural gas has increased by around 400% compared to a year ago EU states have activated natural gas contingency plans The shutdown is hampering EU efforts to fill storage space Russia says the sanctions are preventing the pipeline from operating

LONDON/OSLO, Sept 5 (Reuters) – European natural gas prices jumped as much as 30 percent on Monday after Russia said one of its main natural gas pipelines to Europe would remain shut indefinitely, boosting renewed fears of gas shortages and restrictions in Europe. Union this winter. The benchmark natural gas price rose as much as 272 euros per megawatt hour (MWh) when the market opened after Russia announced on Friday that a leak in equipment on the Nord Stream 1 pipeline meant it would remain shut beyond a three-day maintenance outage of last week. The Dutch TTF natural gas contract for October had fallen to 256 euros, up 23% on the day at 07:23 GMT, but almost 400% higher than a year ago. This year’s price hikes have squeezed already hard-pressed consumers and forced some industries to halt production. Sign up now for FREE unlimited access to Reuters.comSign up Europe has accused Russia of rigging energy supplies in retaliation for Western sanctions imposed on Moscow over its invasion of Ukraine. Russia says the West has waged economic warfare and sanctions have hampered pipeline work. The Nord Stream pipeline, which runs under the Baltic Sea to Germany, has historically delivered about a third of the natural gas exported by Russia to Europe, but was already operating at just 20% of capacity before flows were halted last week for maintenance. Russian gas delivered via Ukraine, another important route, has also been reduced, leaving the EU scrambling to find alternative supplies to replenish gas storage facilities for the winter. Several states have activated emergency plans that could lead to energy cuts and raise the prospect of a recession. “Supply is hard to come by and it’s getting harder and harder to replace every bit of natural gas that doesn’t come from Russia,” said Jacob Mandel, senior commodities partner at Aurora Energy Research. High energy costs have already forced some energy-hungry industries, including fertilizer and aluminum makers, to cut production and led EU governments to pump billions of euros into programs to help households. read more

PREPARE FOR THE WORST

EU energy ministers are due to meet on September 9 to discuss options to curb rising energy prices, including gas price caps and emergency credit lines for energy market participants, according to a document saw Reuters. read more German Chancellor Olaf Scholz said on Sunday that Germany, the EU’s economic powerhouse and Europe’s biggest gas consumer, was preparing for a complete gas supply cutoff. Germany is in the second phase of a three-stage natural gas emergency plan. The third phase will see a rationing industry. read more In its scramble for alternative natural gas supplies, Germany is rapidly installing temporary liquefied natural gas (LNG) terminals to allow it to receive natural gas from producers further afield and plans to build permanent LNG facilities. read more Norway, a major European gas producer, is also pumping more fuel into European markets. “There’s a lot of room to replace that (Russian) natural gas with LNG imports at the moment, but when the weather is cold and demand starts to pick up in the winter in Europe and Asia, there’s only so much LNG out there that Europe can to enter. Mandel said. The global LNG market was already tight as the global economy absorbed supplies in the recovery from the pandemic, even before the crisis in Ukraine added to the challenge. Klaus Mueller, chairman of Germany’s Federal Grid Agency, said in August that even if Germany’s natural gas reserves were 100% full, they would be empty in 2-1/2 months if Russian gas flows stopped. completely. Germany’s warehouses are now around 85% full, while facilities across Europe hit the 80% target last week. Although Russian gas still flows to Europe through Ukraine, albeit at reduced levels, analysts said those supplies could also fall victim to the conflict. “We are shifting focus to (gas) … continuing to flow into Europe via Ukraine,” James Huckstepp, EMEA gas analyst at S&P Global Platts, said in a tweet, adding that it was “only a matter of time. …’ before those who experienced disturbances. Sign up now for FREE unlimited access to Reuters.comSign up Reporting by Susanna Twidale and Nora Buli in OSLO. Edited by Jan Harvey and Edmund Blair Our Standards: The Thomson Reuters Trust Principles.