The European Union (EU) on Oct. 4 adopted a new package of sanctions on Russia, including legislation to put a price cap related to the seaborne transport of Russian oil for third countries, and further restrictions on the seaborne transport of crude oil and oil products to third countries.
These latest sanctions come amid Moscow’s escalating war of aggression against Ukraine and the illegal annexation of Ukraine’s Donetsk, Luhansk, Zaporizhzhia, and Kherson regions.
The combination of the new measures effectively means it will be prohibited for EU companies to provide maritime transport and to provide technical assistance, brokering services, or financing or financial assistance related to the seaborne transport of crude oil to third countries as of December 2022, or oil products as of Feb. 2023, which originate in or are exported from Russia, according to a statement by the EU Council.
The price cap derogation would allow the provision of transport and these services if the oil or oil products are purchased at or below a pre-established price cap, the statement read.
In addition to the aim of the price cap to “drastically reducing the revenues Russia earns from oil,” it is hoped the oil price cap can also serve to stabilize global energy prices, the EU Council said.
The new sanctions did not address gas directly. But the new package highlights the European Commission’s “determination to continue making the Kremlin pay,” Bloomberg cited European Commission President Ursula Von Der Leyen saying on Twitter.
Natural gas prices fluctuated as traders digested the latest EU sanctions on Russia, and news that Russian state-run gas major Gazprom PJSC had resumed gas flows to Italy via Austria.
Benchmark prices on the Dutch TTF in Amsterdam rose as much as 6.7% on Oct. 5 to €173.695 per megawatt-hour (MWh). But the front-month (currently November) was down 3.9% at €166.90 per MWh as of 3:59 p.m. (GMT) on Oct. 6, its lowest level since July 22.
Russian gas exports to the EU have fallen to a fraction of their levels before the invasion of Ukraine began, to around 9% of total gas requirements, down from around 40% previously (GM Sept. 30, p. 1).
Gazprom reported that its gas output fell by 17.1% year-over-year to 313.3 billion cubic meters in the nine months to Sept. 30, 2022, according to a Prime news agency report, citing an Oct. 3 statement from the company on preliminary production data.
According to the report, gas exports to non-CIS states fell 40.4% on the year to 86.9 million cubic meters, while gas supplies to China via the Sila Sibiri pipeline continued to increase.
Even so, Gazprom reached a solution with Italian buyers to overcome recent regulatory changes in Austria that were preventing transit flows, Bloomberg reported, adding Italy’s Eni SpA had confirmed the resumption of gas shipments.
But supply risks to Europe remain, as well as questions about the region’s ability to replenish inventories at the end of this winter, or in the event of prolonged cold weather. The EU remains heavily dependent on stockpiles and imports of liquefied natural gas (LNG) to see it through the winter months.
“We probably have to assume that the piped flow of Russian gas into Europe will not be back” after Russia’s war in Ukraine ends, adding that Europe’s energy crisis could look more severe in the 2023-24 winter than in the coming winter, said Shell Plc Executive Vice President LNG Cederic Cremers at the Energy Intelligence Forum in London this week, as cited by Bloomberg.
Russian gas flows through Nord Stream 1, the key pipeline bringing Russian gas to Europe via Germany, have been halted since Aug. 31 (GM Sept. 2, p. 35), while Nord Stream 2 has never started up commercial operation.
Four leaks were detected early last week on Nord Stream 1 and on the Nord Stream 2 pipeline, which runs parallel with Nord Stream 1 under the Baltic Sea, after explosions were heard. Two of the leaks were in Danish waters and two in Swedish waters north of the Danish Island of Bornholm
Several governments last week believed the damage to the Nord Stream gas structures was “deliberate” and “an act of sabotage,” with many pointing the finger at Moscow.
This week, Swedish investigators, as cited by a Bloomberg report, said detonations caused the ruptures to the pipelines, “with evidence pointing to a deliberate act.”
The Swedish Security Service said in a statement on Oct. 6, as cited by the report, that the completed preliminary investigation has “strengthened the suspicions of serious sabotage,” but stopped short of saying how the detonations occurred or who might be responsible.
While the Nord Stream 1 or 2 pipelines had not been transporting gas, both contained gas at the time of the leaks. Sources close to the matter had said the absence of active gas flows through the two pipelines had limited the immediate impact of the damage from leaking gas.
Gazprom reported early on Oct. 3 that the gas leaks on the two pipelines had stopped, adding it was siphoning off gas from the last thread of Nord Stream 2 and would inspect the integrity of the pipelines, as cited by a Prime news agency report.