With winter fast approaching and a stunning energy price surge pummeling Europe, Russian President Vladimir Putin chose an opportune moment to use his country’s leverage as an oil and gas superpower.
On a chaotic day that saw European benchmark gas surge 40 percent within a few minutes, Putin eased prices by offering to help stabilize the situation.
Russia could potentially export record volumes of the vital fuel to the continent this year, he said.
Quick certification of the controversial Nord Stream 2 natural gas pipeline would be one way to achieve this, Russian Deputy Prime Minister Alexander Novak said.
Nord Stream 2 lines completed under the Baltic Sea between Russia and Germany is tied up in a long, complicated and highly politicized permitting process. While Putin did not directly link additional supplies to approval for the pipeline, he noted that another major route for Russian exports to Europe, Ukraine, was more expensive and polluting.
“Let’s think through the potential increase of supply on the market, only we need to do it carefully,” Putin said at a televised meeting on Wednesday.
Europe’s energy crisis is rippling though stock and bond markets, spurring inflation fears and threatening to cripple major industries. The region’s governments are struggling to respond, with little more than hopes for a mild winter to cushion the blow.
Lower-than-anticipated supplies from Russia, the region’s largest supplier, have been a major cause of the dire situation, some European officials said.
Putin said that state-run Gazprom PJSC has fulfilled all of its supply contracts and his country has no desire to see the “speculative frenzy” that is currently gripping markets.
“Russia has always been and is a reliable supplier of gas to its consumers all over the world — both to Asia and to Europe, and always fulfills all its obligations in full,” he said.
Exports heading from Gazprom to Europe in the first nine months of the year were close to all-time highs, it said.
If that pace is sustained for the rest of this year, it would be a record year, Putin said.
Putin asked his government and energy executives for proposals on how to stabilize the energy market, and Nord Stream 2 was not the only proposal.
Novak, former energy minister and one of the architects of OPEC+, also suggested selling some additional volumes on Gazprom’s own electronic platform based in St Petersburg.
Putin said Gazprom would send more gas via Ukraine than it has contracted to this year. Yet he also talked down the suitability of the country as a transit route, saying Russia’s new pipeline systems under the Black and Baltic seas — which include Nord Stream 2 — are economically and environmentally superior.
Shipping greater volumes of gas through Ukraine is “economically unprofitable for Gazprom, because it is more expensive,” Putin said. “Supply through new pipeline systems that were commissioned in recent years and are being commissioned now reduces the amount of carbon dioxide emissions into the atmosphere by 5.6 times.”
Separately, Britain faces tight electricity supplies this winter on rising demand and capacity constraints, National Grid ESO said in a report yesterday, although a top official said he was confident it would keep the lights on.
The report comes amid record high energy prices in Britain, which contributed to nine energy suppliers going bust last month, caused some industrial firms to curtail production and warnings over some food shortages this winter.
The British electricity system operator said its base case for de-rated margin, which is a measure of the amount of excess capacity expected above peak electricity demand, is currently 3.9 gigawatts (GW) for the coming winter, or 6.6 percent of capacity, down from 4.8GW, or 8.3 percent last winter.
“We are confident that there will be enough capacity available to keep Britain’s lights on,” National Grid director Fintan Slye said in a statement with the winter outlook.
However, the latest forecast is lower than a winter margin forecast of 4.3GW made in July this year and also the lowest margin level since the winter of 2016-2017.
National Grid yesterday also published a gas outlook in which it said that it expects to have enough gas to meet demand this winter.
Additional reporting by Reuters
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