Russian gas flow to Europe dips to another record low in Sept

Russian president Vladimir Putin has kick-started the EU transition away from natural gas. Moscow cut or reduced gas supplies to Bulgaria, Poland, Finland, The Netherlands and Denmark in April and May, and on August 31, it halted deliveries via the Nord Stream 1 pipeline, ostensibly because of equipment failure. Then on September 26 and September 27, Nord Stream 1's two strings suffered large leaks, along with one of the two Nord Stream 2 strings, with sabotage widely suspected.

Gazprom's monthly gas exports to Europe

Source: Gazprom, Entsog, thierrybros.com

As a result of Nord Stream 1's closure, Russian flow to Europe slumped to only 2.3bn m³ in September, down a third from the previous low seen in August. The market's resilience is now being put to the test, as remaining Russian deliveries are non-replaceable. Unless the EU manages to act in solidarity to avoid German industries taking a significant hit, the next three winters will be very challenging. 

As both Nord Stream 1 strings are now full of corrosive sea water, they will never be used again. Therefore, we have adjusted the maximum levels of the graph above to omit the pipeline's capacity. The theoretical and effective maximums have been reduced to 14bn m³ and 13.1bn m³/month respectively. The incidents at the Nord Stream pipelines mean there is no going back to "business as usual," and Gazprom is no longer in a position to kick-start a price war in Europe.

Put into perspective, the 0.8bn m³ of methane that escaped from the pipelines is the equivalent of 15mn metric tons of CO₂-equivalent emissions – the annual emissions of 1.4mn Europeans or the population of Estonia. According to Kayrros, this is the biggest methane leak on record. At €80/metric ton, the environmental damages will be north of €1bn at a minimum.

Split of Gazprom's monthly gas exports to Europe by route

Source: Gazprom, GTSOU, Entsog, thierrybros.com

In September 2022, LNG send-out in Europe was 101% above the level in the same months last year, and 82% above the historical mean. There is little upside flexibility to attract additional cargoes, hence why the remaining Russian gas can be considered non-replaceable.

EU LNG send-out (excluding Malta)

Source: GIE, thierrybros.com

At the end of September, EU gas storage facilities reached 88% utilisation.

EU gas storage utilisation

Source: GIE, thierrybros.com

So far this year, most lost Russian gas has been replaced by LNG. The lost volume is the equivalent of around 5% of EU primary energy. If the remaining supplies are also cut off (another 5% of the EU mix), the nuclear issues in France, the closure at the start of the year of four of Germany's seven remaining nuclear plants and the closure of another reactor in Belgium last month, we end up with a challenging primary energy equation.

Primary energy consumption changes in the EU

Source: BP Statistical Review, thierrybros.com

Dr. Thierry Bros

Professor at Po Paris & Energy Expert

October 5, 2022