Germany moves closer to gas rationing over Russian disruption

Germany took a step closer to rationing gas after a drastic drop in supplies from Russia, saying Moscow’s decision to weaponise its energy exports had plunged Europe’s largest economy into a “gas crisis”.

Berlin triggered the second stage of its national gas emergency plan, nine days after Russia reduced gas supply through the Nord Stream 1 pipeline under the Baltic Sea by 60 per cent.

“We are in a gas crisis,” said Robert Habeck, economy minister. “From now on, gas is a scarce commodity.”

He said prices were already high but Germans should be prepared for further increases. “That will have an effect on industrial production and weigh heavily on consumers,” Habeck said. “It is an external shock.” Gas was, he added, being deployed “as a weapon against Germany”.

The move to the second stage of the plan signals that the authorities see a “substantial deterioration in the gas supply situation”, but one that the market can deal with without resort to “non-market based measures”.

That means the second stage of the gas plan will not lead to the rationing of gas to industrial companies or consumers, but triggering the third “emergency” level will. Habeck said rationing “shouldn’t happen”, but “of course I can’t rule it out”.

The government also said it was not going to activate a law that would have allowed energy companies to terminate their contracts with customers and demand higher prices, after pushback against the measure from industry.

Futures contracts linked to TTF, the European wholesale gas price, rose 4.7 per cent on Thursday morning to €132.25 per megawatt hour.

Habeck called on Germans to cut their gas consumption. “We will all have to make an effort — but we can do it, in solidarity with each other.” He said the government was taking emergency measures, such as bringing coal-fired power stations out of the reserve. “That’s painful because coal power stations are just poison for the climate,” said Habeck, who is a Green.

Germany’s gas storage facilities are currently 58 per cent full, higher than at this time last year, but Habeck said that if gas supplies remained at their current low level, Germany won’t reach its target of getting storage up to 90 per cent capacity by December unless additional measures are taken.

Gas importers are being forced to make up for the shortfall in gas being supplied through Nord Stream 1 by buying gas on the spot market at much higher prices.

Habeck was speaking just days before Gazprom, Russia’s gas giant, is due to carry out annual maintenance on Nord Stream 1, a move that will bring supply through the pipeline to a halt.

Officials are worried that Gazprom might stop gas deliveries completely while NS1 is closed for repairs. “The supply situation is tight enough without NS1 being shut down,” said one.

Carsten Rolle of the BDI, Germany’s business confederation, said that during previous periods of scheduled maintenance on NS1 Gazprom had made up the shortfall by sending Germany more gas through Ukraine, or via the Yamal-Europe pipeline through Poland.

“But there is a concern that they will not do that this year,” he said. “Already they have cut flows through NS1 by 60 per cent and not made up for it with increased flows through other pipelines.”

Markus Krebber, chief executive of German energy company RWE, said it was “very clear” that the decision to reduce gas flows was “political”, “because it’s not only the [gas] coming via Nord Stream 1 that [is] below contracted volumes, but also via other pipelines.”

Rolle said Gazprom could also use the planned maintenance on NS1 “as a pretext to stop gas supplies for much longer, citing various technical reasons”.

“What is the guarantee that at the end of the maintenance period that you actually do get any gas coming back on?” said James Waddell, an analyst at Energy Aspects.

Russia continues to blame supply disruption on delays to the return of Siemens Energy turbines used at an NS1 pipeline compressor station. Siemens Energy says Canadian sanctions against Russia are preventing it from returning the vital technical equipment from a factory in Montreal.

“What other reasons can there be?” Kremlin spokesman Dmitry Peskov told reporters on Thursday, according to Interfax. “The turbine needs to be put back in place, and they’re not doing that. Our German colleagues know the whole technological service cycle of the gas pipeline extremely well. It has been working perfectly and without fault for many years,” Peskov said.

Russia denies there are any political motives behind the breaks in supplies, he added.

So far, the reduction in flows through NS1 has had little tangible impact on Germany’s supplies because gas consumption during the summer is only a quarter or a fifth of the volume on cold winter days. But it is having a serious effect on efforts to fill gas storage facilities ahead of the winter heating season.

“If we don’t succeed in filling gas storage by the autumn, we’re going to quickly start experiencing gas shortages,” said Jörg Rothermel, head of energy at Germany’s Chemical Industry Association. “And the Bundesnetzagentur [federal energy regulator] will have to start issuing orders for companies to reduce their gas consumption or even switch off some production facilities.”

 Additional reporting by David Sheppard and Joe Miller

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