Europe boosts Russian gas imports

Russian gas supplies to EU countries have reached record-breaking levels: 562mln cu m of gas were supplied yesterday, while the maximum daily export during 2015-2016 winter was 539mln cu m, according to Alexey Miller, Gazprom CEO. All pipelines are load at full capacity, he said. For instance, Yamal-Europe operates at full capacity, Nord Stream is loaded by 90%. The Russian gas transit via Ukraine has reached a record-breaking level too. According to Ukraine’s gas transportation system operator, Ukrtransgaz, gas transit reached 292mln cu m on August 8 alone after some 250mln cu m on August 1.

Alexey Grivach, Deputy Director of the National Energy Security Fund, says demand for the Russian gas has increased dramatically with Europe’s preparations for the heating season. “Underground gas-holders in Europe are filled by 10bln cu m less than a year ago, and the current demand on the market is higher,” the expert says.

According to GIE (Gas Infrastructure Europe), on August 8, 2016, gas holders in EU countries were full by 78% (77.6bln cu b of gas), while on the same day this August, they were full by 66.8% (67bln cu m). EADaily  reported earlier that EU countries accumulated record-breaking levels of gas for the previous heating season. Underground gas-holder reserves reached 91bln cu m, which helped Europe overcome cold winter. At the end of the season, only 20.9bln cu m of gas were left in UGHs.

Daily pumping of gas to European gas-holders totaled 372mln cu m on August 8, with Germany, Austria, Italy and France pumping the highest amounts of gas. Besides, Gazprom says, Slovakia, Czech Republic, Turkey, Serbia, Macedonia, Greece, Hungary, and Bulgaria have increased Russian gas import in the current year. Russian gas export increased 8.6% in total for the first half of 2017, the Russian Federal Customs Service says.

Demand for LNG too has increased in Europe, mainly in the countries not supplied with Russian natural gas via pipelines. Spain supplied 48mln cu m of LNG to the gas transportation system in August, Portugal supplied 16mln cu m. Total supply of LNG amounted to 145mln cu m, which is almost 4-fold less than the Russian gas supplied to EU countries.

Noteworthy that export of the U.S. LNG to Europe is still low due to the gas price. According to the U.S. EIA, in May, when pumping is usually launched, approximately by 281 million cu m of gas were delivered to Poland, Portugal and Netherlands. Instead, Gazprom has exported more than 17bln cu m of gas monthly in average in the current year.

Aleksey Grivach explains demand for the Russian gas in Europe also with the risk of halting transit via Ukraine and possible rise in spot prices ahead of heating season.

Spot price of gas at Baumgarten regional gas hub averages $205 per 1,000 cu m at present. According to Alexey Grivach, Russian gas prices have increased since last year too. The IMF says, in June, the Russian gas cost $177 per 1,000 cu m on the border with Germany. Anyway, this is lower than spot prices, not to mention the prices of U.S. LNG.

In May, EIA says, LNG was sold to Portugal and Netherlands for $225. Such gas prices from rival suppliers are one of the reasons behind high demand for the Russian gas.

Recall that the U.S. sanctions on Russia look to block construction of new gas pipelines from Russia to Europe and oust Gazprom from the EU gas market. Experts say Washington needs higher gas prices, while hindering Russian gas pipeline projects may, as Carsten Poppinga, Statkraft Managing Director, says, result in gas deficit and rise in gas prices in EU by 30%.