Ukraine Stops Russian Gas Flowing to Europe Through Key Pipeline

Ukraine is reducing the flow of Russian natural gas through its territory to Europe, presenting a new threat to the energy security of a continent that is racing to cut its dependence on fossil fuels. of Russia.

The company that operates Ukraine’s pipeline network blocked the flow of gas through a key point of entry in the east of the country on Wednesday, due to Russian military interference in vital gas infrastructure. This border gate accounts for a third of Russia’s gas exports through Ukraine to Europe and provides 3% of the total gas consumed by the European Union.

Natural gas prices in Europe spiked before falling again. An increase in the flow of Russian gas through a separate section of pipeline on Ukrainian-controlled territory near the city of Sumy has partially offset the disruption, limiting the rise in prices.

Europe has ramped up energy supplies ahead of a planned EU-wide embargo on Russian oil, which will be lifted this week. Some member states, notably Germany, have also scrambled to find alternative gas supplies amid Moscow’s threat to cut exports. Despite these moves, Europe remains heavily dependent on Russian gas, a source of gas that flows through Ukraine. That gas has continued to move since the February 24 invasion despite the ongoing conflict.

Ukraine energy officials say that Russia appears to have avoided intentionally attacking pipelines that bring revenue to Russia’s already hurting economy, despite massive damage to the country’s domestic gas network. Ukraine leaves millions of residents without fuel. For its part, Ukraine earns shipping fees from Moscow to ship Russian gas to customers in Europe.

Wednesday’s cut-off at the entry point Sokhranivka on the border between the Luhansk region of Donbas and Russia marks the largest disruption to date. It happened as Russia continued to pursue its campaign to capture the Donbas region, eastern Ukraine, including Luhansk.

Right now, enough gas is flowing through Ukraine for companies in Europe to import fuel they have contracted to buy from Russian state giant Gazprom PJSC, analysts say. know. “To get a big market reaction, you will need to meet with the contract holder to confirm that deliveries are not made,” said James Huckstepp, head of EMEA gas analysis at S&P Global Commodity Insights.

If the Ukraine route were to be completely cut off, it would pose a major challenge to a European economy already accustomed to cheap Russian energy.

For more than two decades, Moscow has managed to bypass Ukraine, building the Nord Stream pipeline under the Baltic Sea to Germany with Berlin’s help. That underground pipeline is now the main route for Russian gas into the EU. Another option is Yamal, a pipeline that runs through Belarus and Poland. However, almost a third of Russia’s gas pipeline exports to the EU still pass through Ukraine in the final quarter of 2021. The EU buys about 40% of the gas it burns to heat homes and fight fires. power plant and production from Russia.

The Luhansk shutdown added to the anxiety of energy traders, who were worried in late April when Moscow stopped exporting gas to Poland and Bulgaria. Gazprom said it had not received ruble payments from the two countries as required by President Vladimir Putin’s decree.

As Europe races to phase out Russian energy, US natural gas producers are struggling to meet rising demand and prices. Factors including inclement weather and a need for equipment have created a knot in the middle of the war in Ukraine. Illustration: Laura Kammermann and Sharon Shi

Ukraine’s pipeline operator said on Tuesday it was stopping gas flow through Sokhranivka because it had lost control of Novopskov, a gas compression station near the border with Russia. TSO said Russian forces had interfered with the pipeline network, including by siphoning off gas, in a way that jeopardized the stability of the broader system.

A Gazprom spokesman did not respond to a request for comment. In a statement on Tuesday, a spokesman said Ukrainian gas specialists have continued to work in Sokhranivka and Novopskov. Instead, he said, the gas could not pass through the Sudzha border crossing near Sumy, as proposed by Ukraine.

Ukraine’s gas pipeline operator said such a transfer took place in the fall of 2020 when repairs were underway, illustrating the feasibility of their proposal.

Gas flows appear to be shifting on Wednesday, analysts and traders said. Fuel moves in greater quantities through the Sudzha portion of the network, though not enough to make up for lost flows through Luhansk.

The EU is in the process of banning Russian coal and is working on a deal that will also phase out oil imports. However, natural gas has yet to be targeted as it is the most difficult fuel to supply Europe from elsewhere.

The EU and US have committed to expanding exports of liquefied natural gas to Europe by 2030. But the US has sent all it can to Europe and industry officials say volume expansion will require billions of dollars worth of new export terminals. In Europe, unused LNG import capacity last year could replace just under 29% of Russia’s pipeline gas supply, according to Natasha Fielding, an analyst with Argus Media.

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