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Gazprom, the energy titan in Russia, declared on September 2, 2022, that the company will not be able to begin its supply of natural gas via an important pipeline (Nord Stream 1) to Germany at present owing to what it stated was a requirement for critical upkeep and maintenance work.

This announcement was only hours prior to the company was scheduled for resuming its supplies. The result of this change was that the prices for LNG reached almost USD 70 per MMBtu in Europe that in turn led to the lowering of demand for natural gas in the region.

The background is that the Gazprom was supposed to open its pipeline on Saturday (September 3, 2022) after the maintenance work was done, however, the company announced that a defect had been noticed. The Nord Stream 1 pipeline was initially shut down on Wednesday (August 31, 2022) for only three days of work on some faults discovered.

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The Russian State-run energy company, Gazprom, revealed that it had found oil leakages from its four turbines based in Portovaya compressor station at the Russian side of the pipeline, comprising the only functional one. The company alleged that it was sent warnings from the industrial safety watchdog that these seeps are not safe and will not permit for a hassle-free function of the gas turbine engine.

From middle of June 2022, Gazprom began shutting down the deliveries via Nord Stream 1, accusing Canada of delaying the distribution of a turbine that was sent for fixing. Ever since this Canada consented to deliver the turbine to Germany, saying that there was no reason for it not being sent to Russia other than that Russia itself wanted the part.

Ahead of the recent closed down, Nord Stream 1 pipeline was supplying around 30m cubic meters per day, or 20 percent of its volume of 55bcm. This amount was equal to just around 3.7bcm through the remainder of the current year or over 18bcm if in case it was operating at its maximum capability which signifies only 4 percent of the annual demand of Germany and lower than one percent of Europe’s yearly demand.

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Nord Stream 1 has been operating at just 20 percent capability during the current weeks. Russia was reported to have been supplying a little more than a third of the total gas supplies in Germany just prior to the cutbacks began. Russia has also declined its supply of gas to other European nations that have taken the side of Ukraine in the war.

In addition, this news also penetrated the markets in Europe during the week starting on August 22, 2022, with a rapid jump of almost 15 percent in the Dutch Title Transfer Facility (TFF) gas futures from the previous Friday (August 19, 2022) to end at USD 81.52 per MMBtu.

TFF again started to fall once more on Tuesday (August 30, 2022) ending at nearly USD 80 per MMBtu, after subsequent severe ride on Monday (August 29, 2022). As a result of the instability of Europe’s price held the spot Japan-Korea Marker for North Asian LNG higher.

Policy makers and politicians in Europe have been planning for potential supply reductions for weeks and struggling to discover approaches to bring down the demand. In the middle of the closing down of the industry and the fall of Euro, this newest move is only adding to the feeling of pressure. With the winter approaching, the determination of Europe to keep supporting Ukraine in a combat against Russia could be tested.

While the prices for gas rising four times greater as compared to 2021, the European Union is contemplating unparalleled mediations in the energy market, comprising price limits, decreasing the demand for power, and extra taxes on incomes and profits.

In an effort to be ready for the likelihood of the stoppage and keep a buffer for a minimum of half of the winter season, Europe has been developing its stocks. However, there might be a harsher scenario once the stockpiles reduce, specifically towards the closer of the heating period or in case Europe faces a terrible cold break. According to the reports, the storage space in Germany is stocked for more than 84 percent.

As per Procurement Resource, on September 2, 2022, Gazprom announced that the company will not be able to begin its supply of natural gas through Nord Stream 1 to Germany at present because of the ongoing maintenance work. Gazprom started closing the supplies from middle of June 2022 and alleged that Canada was delaying the delivering a turbine that was sent for repair work.

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This news also entered the European markets during the week of August 22, 2022, leading to a swift leap of about 15 percent in the Dutch Title Transfer Facility (TFF) gas futures from the previous Friday (August 19, 2022) to end at USD 81.52 per MMBtu.

In the meanwhile, politicians in European region are reducing the supply for weeks and are striving to find out approaches to lower the demand. Europe is building it stocks at present to be prepared for the probability of the supply stoppage and also keep a storage for at least a part of the winter season.