Europe Buys More Russian Gas Despite Strained Relations

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By Tsvetana Paraskova, a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets. Originally published at OilPrice

The West-Russia relations have reached a new low since the Cold War amid the spy poisoning scandal in the UK, allegations of Russian meddling in elections, and fresh U.S. sanctions on Russia.

Yet European countries continue to buy increased amounts of Russian gas, and Russia’s state-held gas giant Gazprom is boosting production and exports, and is obtaining approvals in individual countries for its Nord Stream 2 gas pipeline that has divided the EU over fears of a tightening Russian grip on gas supplies.

In recent months and weeks, Gazprom has taken advantage of high demand in Europe and of decreased gas supplies to Europe from Russia’s competitors, Maxim Rubchenko writes for Russian news agency RIA Novosti.

Russia—which already supplies around one-third of Europe’s gas—boosted deliveries in the winter, one of the coldest winters in Europe in the past decade, and continues to ship higher volumes even after the winter, as gas importing countries replenish gas storage supplies that had been drained amid the cold snaps.

Alexander Medvedev, Deputy Chairman of Gazprom’s Management Committee, said at the end of April that the Russian company was currently shipping as much gas to Europe as it typically does in winter months, and expects demand this summer to be close to winter levels.

Gazprom gas deliveries to Europe reached an all-time high in March, beating a previous record from January 2017, the Russian company says. In the first quarter of this year, Gazprom’s gas supply to Europe increased by 6.6 percent compared to the same quarter last year. Gazprom’s gas deliveries to European countries continued to grow in April, even after the winter heating season ended.

Demand in Europe has stayed high after the winter ended. First, because gas storage levels were low, and second—because some of the other traditional gas-supplying countries have decreased supplies over issues or maintenance at facilities.

Norway, Russia’s closest competitor, had to cope with an unplanned outage at the Skarv gas field and Kollsnes processing plant in April. Flows to Europe were reduced after a compressor at the Skarv field in the Norwegian Sea failed.

In the south, Libyan gas flow from the Greenstream pipeline to Italy was stopped on April 2 due to maintenance to integrate gas from a new phase of development at the offshore gas field Bahr Essalam. The maintenance was initially expected to be completed in two weeks, on April 18, but the resumption of gas supplies has been postponed several times, so Italy received no gas from Greenstream for the whole month of April.

Total African pipeline exports to Europe dropped in the last week of April on a continued Libyan outage and reduced Algerian gas deliveries.

While Gazprom is boosting supplies to Europe even after the winter, it has received permits from Germany to build the Nord Stream 2 pipeline and a first permit for the project in Finland. Gazprom has also completed the deepwater pipelay for Line 1 of the TurkStream offshore gas pipeline planned to connect Russia to Turkey across the Black Sea.

Meanwhile, Gazprom’s seven-year-old dispute with the EU on antitrust issues may soon be coming to an end. According to Bloomberg sources, the EU could announce as early as in May a settlement with the Russian company under which Gazprom could agree to binding pledges to allay antitrust concerns, which could put an end to the antitrust investigation that started in 2011.

Despite high political tensions, Russia continues to boost gas supplies to Europe, and Europe continues to buy.

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  1. Clive

    Often lost in the raw stats for Russian gas supplies is that while in percentage terms it sounds on the low side (such as here for the U.K.) this belies the fact that — in an energy crunch — such as last happened in March this year the only participant in the market was Russia.

    Continuing in the U.K. considerations, during the period of high demand during the cold spell when the U.K. grid offered to buy gas as £0.20 / kWh (over 25 cents in US$ terms — 2 to 3 cents is the usual market price) no-one in the EU would release their stocks held in reserve to help meet U.K. flow requirements. It’s at times like that when you find out who your friends really are. Of course, this makes the stupid and credulity-stretching anti-Russia mood music even more ridiculous.

    And do not even get me started on the Skripals “nerve agent” “poisoning” farce.

    1. visitor

      And do not even get me started on the Skripals “nerve agent” “poisoning” farce.

      Did you not get that D-notice?

    2. RBHoughton

      Well said Clive. I hope the EC drops the posturing and recognises its dependence on Russian minerals. As you say, its a cold world out there. Europe has no reason to make enemies if we can be friends.

  2. The Rev Kev

    You would reckon that it would be simply a question of supply and demand but no, geopolitics rears its ugly head and makes business planning a local version of business-hell. The US wants to replace Russia as the main gas supplier in Europe to both displace Russia and to have a throttle grip on the EU. However, geography wins here. A bit of background here.
    Simply put, Russia already has an extensive pipeline network in place and LNG is more expensive when transportation, liquefaction and regasification costs are added. Russian gas sells for around $5/MMBtu (one million British Thermal Units) in European markets I believe whereas American supplies would cost about $6/MMBtu which is a real nut-buster. At the moment, about there-quarters of Russia’s gas goes to Europe.
    The recent freezes in the northern hemisphere tested gas supplies badly. Spot gas prices tripled to a record and that led to more Russian supplies by pipeline and in addition, gas tankers were sent to both the UK and the US to make up shortfalls in local supplies. It was the coldest end of the winter in years, and Russia was the only country with enough spare capacity to meet an extreme surge in demand. All the talk about depending on gas from Norway, the US and Qatar turned out to be just that – talk. Besides, countries like Qatar down the track are more likely to ship their gas to China to meet increasing need.
    Europe is already losing with Russian oil. Right now Russia is cutting back more and more oil being delivered to Europe and instead sending it to the growing market in China. This is a result of a second Sino-Russian oil pipeline becoming operational at the start of the year which doubled China’s capacity to pump oil from the East Siberia-Pacific Ocean (ESPO) system. In fact, Russia is shipping lower grades of oil to Europe and sending the better grades to China. The thought of the same happening with gas is not to be contemplated. In fact, it may be necessary to build a Nord Stream 3 pipeline to meet increasing demand however much the Baltic countries complain. The reason that they are against it is because there is a newly built terminal in Poland and the Baltic countries want to cash in on transit fees. The Russians want long term contracts or else China beckons and the Europeans will almost certainly have to agree however much the EU and the Baltic countries complain.

  3. rkka

    What Kev said. Plus, the long-term contracts specifying Uzhgorod as the point of delivery for Russian gas to the EU expire in 2019, and GAZPROM, weary with the endless shenanigans of the government of Banderastan, will not renew them. This means the Nord Stream ll capacity will be even more critical for Europe’s long term gas supplies.

  4. Tobin Paz

    No oil, no economic growth. No economic growth, the whole ponzi scheme falls apart. Humanity will burn every last drop of recoverable oil regardless of the consequences because the alternative would be a collapse of civilization.

    It’s all about oil:

    The Secret of the Seven Sisters

    1. The Rev Kev

      Proof positive that we are running out of retrievable oil. The seven sisters are now down to only four sisters!

      1. Tobin Paz

        Trudeau actively pushing for the development of the tar sands pipeline is not a good sign.

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