What little Russian gas supply is still coming to Europe may be under threat. Reports by Russia’s security service this week that they had thwarted a planned attack by Ukraine on the TurkStream pipeline – a claim that Kyiv has denied – have highlighted risks to the remaining Russian supply to Europe, Bloomberg reported.
The pipeline is the only route that transports Russia’s gas to Turkey and Europe, and is the only Russia-Europe gas conduit that has not had any disruptions this year.
PJSC Gazprom is currently sending about 80 million cubic meters of gas to Europe a day – around 20% of the Russian gas major’s normal exports to the continent, according to the report. Roughly half of that volume is currently flowing via TurkStream, while the rest is crossing Ukraine. The key Nord Stream 1 pipeline that supplies gas from Russia to Europe via Germany has been halted since Aug. 31 (GM Sept. 2, p. 35).
In his biggest escalation of the war with Ukraine since Moscow’s Feb. 24 invasion, Russian President Vladimir Putin this week ordered a “partial mobilization” of reserve troops, approved a “sham referenda” of Russian-controlled territories in Ukraine’s eastern and southern regions, and once again raised the threat of a nuclear conflict.
European natural gas prices fluctuated on Moscow’s bellicose comments, with the Dutch TTF front-month gas (currently October), the European benchmark, closing at €188.0 a megawatt-hour (MWh) on Sept. 22, some 0.938% down on the day. This was also down on last week’s high of €214.285 per MWh reached on Sept. 15, and some way off the all-time high of €345 per MWh hit in early March this year.
Bigger-than expected inventories, ample supplies of liquefied natural gas, and intervention by European governments (GM Sept. 16, p. 29; July 29, p. 1) have all helped somewhat to ease the continent’s gas supply anxieties in recent days.
But West Lothian, Scotland-based utility management group DB Group (Europe) Ltd. sees “with much in flux and the fundamentals currently unchanged, confusion and volatility are likely to define the market for the following days,” according to Bloomberg, citing a note by the group.
In European nitrogen fertilizer production news, following a Reuters report early this week that Yara International ASA, Oslo, planned to halt production at its Tertre, Belgium, nitrogen complex “in the next few days,” the Norwegian group told Bloomberg on Sept. 21 the company currently has no plans to halt output at the Belgian plant.
“We are producing at a slow pace, but the plant has not stopped production,” said a Yara spokesperson. “We are planning on a weekly basis.”
The complex produces ammonia, nitric acid, and ammonium nitrate fertilizers.
Yara said in July it was implementing cuts to capacity due to high gas prices. The company said as of July 19, it had curtailed several of its production plants across Europe, amounting to an annual capacity of 1.3 million mt/y of ammonia and 1.7 million mt/y of finished fertilizer. The company did not rule out further cuts to production.
Germany’s largest ammonia and urea producer, SKW Piesteritz GmbH, is in the process of resuming full production after a planned turnaround on one of its two ammonia lines, after seeking government aid. The company had brought forward the turnaround due to escalating natural gas prices.
But SKW warned this week that it “fears for the international competitiveness of Germany as a business location under these conditions,” the UK’s Financial Times reported.
SKW has two ammonia plants, each with capacity to produce 0.54 million mt/y, three urea plants with an aggregate capacity of 1.18 million mt/y, and one UAN unit with a 0.5 million mt/y production capacity, according to Green Markets’ capacity database.
Should Germany be forced to ration gas for industrial use this winter, BASF SE said it can reduce its gas consumption at its major Ludwigshafen production site to a degree by curtailing individual plants or swapping gas for fuel oil at some production stages, according to a report by the UK’s Guardian newspaper.
The company already has reduced its production of ammonia at Ludwigshafen, and also at its Antwerp, Belgium, site, instead buying in some ammonia from other suppliers (GM July 22, p. 1; July 1, p. 1).
In Europe, BASF has ammonia production capacity of 910,000 mt/y at Ludwigshafen and 610,000 mt/y at Antwerp, according to Green Markets capacity database.
But, because the 125 production plants at Ludwigshafen are an interconnected value chain, there is a point at which a drop of gas supplies would lead to a site-wide shutdown, according to the Guardian report, citing a BASF spokesperson .
She told the newspaper that once the company receives “significantly and permanently less than 50%” of its maximum requirements, it would need to wind down the entire site.
But with German gas storage 87% full, there is increasing optimism that rationing in the country can be averted this winter. Still, even then high gas prices could force companies such as BASF to halt production.
Meanwhile, Slovakia’s biggest producer of basic chemicals and a producer of nitrogen fertilizer, Duslo a.s., has decided not to resume production after a scheduled six-week maintenance turnaround due to high energy costs, according to a Bloomberg report, citing the Slovakian Denník N newspaper.
Duslo’s CEO Petr Bláha said the company will resume production only after the Slovak government approves the financial aid required to deal with high energy costs, according to the report.
Duslo – a unit of the Prague, Czech Republic-based Agrofert Group – halted production in mid-August (GM Sept. 2, p. 29).
The company manufactures granular and liquid nitrogen fertilizers in addition to ammonia production, and a number of rubber-based chemical products. It also operates one of Europe’s largest AdBlue plants. AdBlue is an essential additive for diesel trucks to reduce levels of nitrogen oxides (NOx) pollution from their engines.