Russian gas giant Gazprom PJSC on July 27 cut natural gas supplies via the key Nord Stream 1 pipeline connecting Russia with Europe via Germany to around 20% of the pipeline’s capacity.
European gas prices have soared on the further restricted flows through the pipeline.
Front-month (currently August) natural gas futures on the Dutch TTF hub, the European benchmark, were at €201.396 per megawatt-hour (MWh) at close on July 28, down from 204.95 per megawatt-hour (MWh) at 10.07 am (GMT) and having hit €228 per MWh on July 27. That compares to a July 26 close of €199.02 per MWh and €159.865 per MWh on July 22.
European Union (E.U.) countries had breathed a sigh of relief last week when gas flows through Nord Stream 1 were resumed on July 21 after it was closed for 10 days of planned maintenance (GM July 22, p. 1). Many had feared Russia would keep the pipeline closed.
Initial shipments were made at some 40% of capacity, according to a Bloomberg report, citing data from the pipeline operator.
The reduction of flows to 20% of capacity comes after Gazprom took out of service one more turbine at the Russian end of the pipeline for maintenance. Hitherto, only two out of six turbines at the Russian end of the line were operating as Western sanctions have limited maintenance options for the equipment, according to the gas major.
One additional turbine is still in Germany amid paperwork delays, Russian newspaper Kommersant reported, as cited by Bloomberg. The turbine was first stranded in Canada.
Flows of natural gas through the Nord Stream 1 pipeline to Europe will depend on how quickly the pipeline equipment is repaired and returned to Gazprom, according to Kremlin spokesperson Dmitry Peskov, speaking to reporters this week, as cited by a Bloomberg report.
According to Peskov, Russia is “not interested” in a complete cut-off of its gas deliveries to Europe.
But – as cited by Bloomberg – he said if Europe continues its course of “absolutely recklessly” imposing sanctions and restrictions that are hitting Russia, “the situation may change.”
The CEO of German chemicals giant BASF SE, Martin Brudermüller, on July 27 said the company will reduce production at ammonia plants and other facilities that need “large volumes” of natural gas to operate. The company did not provide any specifics on the planned reductions and plant utilization rates.
In Europe, BASF has ammonia production capacity of 910,000 mt/y at Ludwigshafen, Germany, and 610,000 mt/y at Antwerp, Belgium, according to the Green Markets database.
Brudermüller said at a media call presenting second-quarter earnings that BASF will buy some ammonia from other suppliers to meet orders, but fertilizer prices are expected to rise in 2023.
Early this month, BASF was reported to have reduced ammonia production rates at Ludwigshafen and Antwerp. But the company, as cited by a Dow Jones report, said all internal and external customer needs were currently being met (GM July 1, p. 1).
BASF’s decision to cut its ammonia production will enable the company to offer surplus gas to an auction under Germany’s emergency gas supply plan, according to a Bloomberg report, citing unnamed sources familiar with the matter. The emergency supply plan is in case Russian gas deliveries to Europe come to a halt.
Unlike many other European countries, Germany has no liquefied natural gas (LNG) import terminals to replace Russian pipeline gas.
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, but said the future capacity utilization rate “was extremely difficult to predict,” according to a Reuters report.
The company had brought forward the turnaround, but it is unclear if this was due to the recent temporary shutdown of Nord Stream 1 and/or due to other factors (GM July 8, p. 1).
SKW has two ammonia plants, each with capacity to produce 0.54 million mt/y, according to the Green Markets Capacity Database.
Yara International ASA, owner of Germany’s third-largest ammonia production plant at Brunsbüttel in the north of the country, said it has curtailed several of its production plants across Europe as of July 19, amounting to an annual capacity of 1.3 million mt of ammonia and 1.7 million mt of finished fertilizer, and warned that more cuts may come.
The curtailments in Yara’s ammonia and finished fertilizer production equate to around 27% and 18%, respectively, of the company’s European capacity. The company is understood to have about 0.8 million mt/y of ammonia production capacity at Brunsbüttel.
Amid deteriorating Russian gas flows, E.U. Member States on July 26 reached a deal on a voluntary reduction of their natural gas use by 15% through next winter – coming just a week after the European Commission proposed the regulation amid fears of a complete cut-off of Russian supplies.
Member States have agreed to reduce their gas demand by 15% compared to their average consumption in the past five year, between Aug. 1, 2022, and March 31, 2023, “with measures of their own choice,” according to a July 26 media statement by the European Council. The new rules should enter into effect in the next coming days.
The Commission has warned that targets would be “mandatory” in the event of severe disruption to supplies.
The European Council has specified some exemptions and possibilities to request a derogation from the mandatory reduction target in order to reflect the particular situations of Member States and ensure that the gas reductions are effective in increasing security of supply in the E.U.