On Monday, the results of a highly anticipated auction revealed that Russia’s state-owned gas giant Gazprom had not reserved any extra gas transit capacity for November, either through the Ukrainian pipeline system or through lines into Western Europe via Poland.
Because the auctions take place two to three weeks before the month in which natural gas flows, the outcomes are viewed as a crucial indication to the market of future quantities.
The data, according to analysts, suggest that Russia is not in a rush to increase supplies to the area, and they give more evidence that the Kremlin is working to ensure a smooth start-up of commercial flows via Nord Stream 2.
Russia has decided not to transfer extra natural gas supplies to Europe, putting an end to expectations that Moscow might loosen its hold on the market after President Vladimir Putin stated that the nation would be willing to assist.
On Monday, the results of a highly anticipated auction revealed that Russia’s state-owned gas giant Gazprom had not reserved any extra gas transit capacity for November, either through the Ukrainian pipeline system or through lines into Western Europe via Poland.
Gazprom has only scheduled 30 million cubic meters per day on the Yamal-Europe line, which has a capacity of 86.5 million cubic meters per day, which is equivalent to September’s capacity, and has not booked any volumes via Ukraine.
Because the auctions take place two to three weeks before the month in which natural gas flows, the outcomes are viewed as a crucial indication to the market of future quantities.
The results, according to energy analysts, show that Russia is not in a rush to increase supplies to the region, and that the Kremlin is working to ensure a smooth start-up of commercial flows via Nord Stream 2 — a contentious natural gas pipeline that aims to deliver Russian gas directly to Germany via the Baltic Sea.
It comes after Putin stated that Russia might supplement Europe’s energy supply at a time when millions of homes are suffering sky-high winter energy costs.
On Oct. 13, Russian President Vladimir Putin told CNBC’s Hadley Gamble that allegations that his government was using gas as a geopolitical weapon were “politically driven nonsense.”
More gas is on the table, but only if Nord Stream 2 is built
According to Eurostat data, Russia is Europe’s top gas provider, delivering about 43% of the European Union’s gas imports last year.
However, since the end of September, Russia’s natural gas shipments to Europe have been unpredictable, causing market concern and soaring prices.
On Tuesday morning, November contracts at the Dutch TTF hub — a European benchmark for natural gas — were trading at approximately 92 euros per megawatt hour. The front-month contract was down approximately 2% on the day, reversing earlier gains, and has up almost 400% since the beginning of the year.
EU legislators and the president of Ukraine’s national energy firm Naftogaz have already accused Gazprom of intentionally withholding larger quantities of gas from Europe, therefore exacerbating the region’s energy crisis.
In a rare public reprimand of Russia, the International Energy Agency published a statement in late September urging Moscow to provide more gas to Europe to relieve the region’s increasing supply crisis.
Russia has said that it has completed all of its contractual commitments to Europe
Separately, Nord Stream 2’s Swiss operator announced on Monday that the pipeline’s first line had been filled with so-called “technical” gas and was now ready for commercial flows.
“This development increased the risk that not as much capacity would be booked via auctions via Poland and Ukraine,” said Tom Marzec-Manser, lead European gas analyst at ICIS, a commodity intelligence service. “Gazprom would want to prioritize throughput on its new asset, rather than pay for additional capacity,” he added.
Nord Stream 2 was finished last month, and Germany’s energy authority has given the project four months to complete certification after obtaining the required documentation for an operating license.
In a research note, Kateryna Filippenko, chief analyst of European gas research at Wood Mackenzie, stated, “With the European gas balance tightening throughout the winter, the risk is strong that Russian gas will not provide further supply flexibility.”
“The completion of the Nord Stream 2 gas-in processes, along with no major capacity bookings on other routes, appears to send a strong signal to Europe – Gazprom may be willing to deliver more gas, but only if Nord Stream 2 is approved.”
Nord Stream 2 opponents claim that the pipeline is incompatible with European climate goals, increasing the region’s reliance on Russian energy exports, and will bolster Putin’s economic and political clout.