European energy supply at risk from low Russian gas flow

With inventories at their lowest level in more than a decade, gas prices in Europe have been volatile.
European energy supply at risk from low Russian gas flow

Russia is flowing less gas into Europe, stoking supply fears.

Europe’s vast network of liquefied natural gas terminals can’t save it from a winter supply crunch.

Liquefied natural gas – or LNG - supplies entering European grids in July fell to the lowest for that month in three years and the outlook for this month is even grimmer.

Just one cargo is scheduled to arrive in the UK in August and traders who have the fuel stored in Spain are set to export six cargoes to capture higher prices in Asia.

All of that comes as Russia has been flowing less gas to Europe, setting the continent up for a very difficult winter should freezing temperatures hit.

With inventories at their lowest level in more than a decade, gas prices in Europe have been volatile. Records have been broken day after day, with the market on edge for any sign of new supply coming through the yet-to-be completed Nord Stream 2 pipeline linking Russia and Germany.

“Europe needs to refill storage, but with the current fight for cargoes, it seems like the market will be very tight unless pipeline flows increase,” said Oystein Kalleklev, chief executive of shipowner Flex LNG. “We need to prepare for a very volatile winter depending on winter weather.” 

Russia has been flowing less gas to Europe via Ukraine - a key transit route - and supplies into Germany through the Yamal-Europe pipeline crossing Belarus and Poland also took a hit after a fire at a Gazprom facility earlier this month. 

The Russian gas giant said this week it was overwhelmed with record demand both abroad and in Russia, where it needs to refill storage sites depleted beyond normal last winter.

Europe gets more gas from Russia than from the continent’s top producers. 

With domestic output in decline and the giant Groningen gas field in the Netherlands possibly closing three years ahead of schedule, the continent is becoming a lot more dependent on the vagaries of the global gas market to get the LNG it needs to keep homes heated and the lights on during the winter.

But tight supplies in Asia mean countries from China to Japan and Korea have been willing to pay more, luring even the supplies stored in Spanish tanks.

Europe’s crunch could ease when Nord Stream 2 starts flowing gas.

A controversial Russian pipeline can deliver the first batches of natural gas to Germany this year, according to Gazprom.

The Nord Stream 2 link can ship 5.6 billion cubic metres of gas in 2021, the Russian gas giant said.

The controversial twin link - which will double the capacity of the existing undersea route from Russian gas fields to Europe - has been a major source of friction in trans-Atlantic relations for several years, with the US claiming it could give Russia new leverage over Europe and introducing sanctions targeting the project. Joe Biden‘s administration softened its stance, reaching a deal with Germany last month to end a longstanding rift over the pipeline.


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