Germany raises level of alarm over Russia gas disruption

Germany raises level of alarm over Russia gas disruption

Germany triggered the second stage of its national gas emergency plan, saying Russia’s decision to weaponise its energy exports had plunged Europe’s largest economy into a “gas crisis”.

The heightened alarm came nine days after Russia reduced gas supply through the Nord Stream 1 pipeline under the Baltic Sea by 60 per cent. The third and highest stage of the national gas plan is the “emergency” level.

“We are in a gas crisis,” said Robert Habeck, economy minister. “From now on, gas is a scarce commodity. † † † Prices are already high and we must prepare for further increases. That will have an effect on industrial production and weigh heavily on consumers. It’s an external shock.” Habeck said gas was being deployed “as a weapon against Germany”.

The move to the second stage of the plan signals that the authorities are seeing a “substantial deterioration in the gas supply situation”, but one that the market can deal with without resort to “non-market based measures”. Triggering the second stage will not lead to the rationing of gas to industrial customers.

The government also said it was not going to activate a law that allowed energy companies to pass on soaring costs to customers after pushback against the measure from industry.

Futures contracts linked to TTF, the European wholesale gas price, rose 4.7 per cent on Thursday morning to €132.25 per megawatt hour.

Germany’s gas storage facilities are currently 58 per cent full, higher than at this time last year, but Habeck said that if gas supplies remained at their current low level, Germany won’t reach its goal of getting storage up to 90 per cent capacity by December unless additional measures are taken.

Gas importers are being forced to make up for the shortfall in gas being supplied through Nord Stream 1 by buying gas on the spot market at much higher prices.

Habeck was speaking just days before Gazprom, Russia’s gas giant, is due to carry out annual maintenance on Nord Stream 1, a move that will bring supply through the pipeline to a stop.

Officials are worried that Gazprom might stop gas deliveries completely while NS1 is closed for repairs. “The supply situation is tight enough without NS1 being shut down,” said one.

Carsten Rolle of the BDI, Germany’s business confederation, said that during previous periods of scheduled maintenance on NS1 Gazprom had made up the shortfall by sending Germany more gas through Ukraine, or via the Yamal-Europe pipeline through Poland.

“But there is a concern that they will not do that this year,” he said. “Already they have cut flows through NS1 by 60 per cent and not made up for it with increased flows through other pipelines.”

Markus Krebber, chief executive of German energy company RWE, said it was “very clear” that the decision to reduce gas flows was “political”, “because it’s not only the [gas] coming via Nord Stream 1 that [is] below contracted volumes, but also via other pipelines.”

Rolle said Gazprom could also use the planned maintenance on NS1 “as a pretext to stop gas supplies for much longer, citing various technical reasons”.

“What is the guarantee that at the end of the maintenance period that you actually do get any gas coming back on?” said James Waddell, an analyst at Energy Aspects.

So far, the reduction in flows through NS1 has had little tangible impact on Germany’s supplies because gas consumption during the summer is only a quarter or a fifth of the volume on cold winter days. But it is having a serious effect on efforts to fill gas storage facilities ahead of the winter heating season.

“If we don’t succeed in filling gas storage by the autumn, we’re going to quickly start experiencing gas shortages,” said Jörg Rothermel, head of energy at Germany’s Chemical Industry Association. “And the Bundesnetzagentur [federal energy regulator] will have to start issuing orders for companies to reduce their gas consumption or even switch off some production facilities.”

Additional reporting by David Sheppard and Joe Miller

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