Russia expands Europe’s gas cuts and stops Dutch, Danish and German contracts

A 3D-printed natural gas pipeline is placed in front of the Gazprom logo shown in this illustration taken on February 8, 2022. REUTERS / Dado Ruvic / Illustration / File Photo

May 31 (Reuters) – Russia extended its gas cuts to Europe on Tuesday with Gazprom (GAZP.MM) saying it would shut off supplies to several “unfriendly” countries that have refused to accept Moscow’s payment for gas rubles.

The move by the Russian gas giant is the latest retaliation against Western sanctions imposed on Moscow after the invasion of Ukraine on February 24, which escalated the economic battle with Brussels and pushed up European gas prices. read more

Gazprom said on Tuesday that they had completely stopped the gas supply to the Dutch gas dealer GasTerra. read more

It later said that it would also stop from 1 June the gas flows to Danish Ørsted (ORSTED.CO) and Shell Energy (SHEL.L) for the contract for gas deliveries to Germany, after both failed to pay in rubles. read more

The announcements follow Monday’s agreement from EU leaders to cut EU imports of Russian oil by 90% by the end of the year, the bloc’s toughest response to the invasion to date. read more

NO THREAT TO DELIVER

GasTerra, which buys and trades gas on behalf of the Dutch government, said it had entered into contracts elsewhere for the 2 billion cubic meters (bcm) of gas it had expected to receive from Gazprom through October.

“This is not yet seen as a threat to supplies,” said Finance Ministry spokesman Pieter ten Bruggencate.

Orsted, who has also said that there was no immediate risk to Denmark’s gas supplies, said on Tuesday that they would turn to the European gas market to fill the gap. read more

“The gas for Denmark must to a greater extent be bought on the European gas market. We expect this to be possible,” Orsted CEO Mads Nipper said in a statement shortly after Gazprom’s announcement.

The reference contract for the first month’s gas rose by around 5% on Tuesday afternoon to around 91.05 euros / MWh, but remained well below the peaks above 300 euros / MWh which were reached in early March.

“While the market largely expected both companies to be cut off, this development will make the balance between supply and demand so much tighter,” ICIS analyst Tom Marzec-Manser said on Twitter.

Russian gas flows to Germany via the Nord Stream pipeline fell on Tuesday, something analysts said was probably due to the Netherlands being cut off. read more

Moscow had already stopped the supply of natural gas to Bulgaria, Poland and Finland on the grounds that they refused to pay in Russian rubles, a demand made in response to Western sanctions that have isolated Russia. read more

However, German, Italian and French companies have said they will participate in the scheme to maintain supplies. read more

Supply cuts have boosted already high gas prices, set turbo inflation and encouraged European governments and companies to pursue alternative sources and the infrastructure to deal with them, including floating storage and regasification units (FSRU).

STORAGE

Europe has rushed to fill its gas reserves ahead of winter, on guard against Russian supply cuts, which typically provide around 40% of Europe’s gas. read more

The Dutch gas storage is now around 37% full, data from Gas Infrastructure Europe showed.

The Dutch government said last week that it would increase subsidies to 406 million euros to encourage companies to fill the Bergermeer plant, one of the largest open-source gas storage facilities in Europe.

Danish gas storage is currently 55% full and will be able to supply all Danish and Swedish gas customers for five months if supply from Germany is interrupted, a letter from the Danish Minister of Energy Dan Jørgensen showed to Parliament.

Reporting by Toby Sterling and Anthony Deutsch in Amsterdam; Jan Strupczewski and Philip Blenkinsop in Brussels; Stine Jacobsen in Copenhagen; Susanna Twidale and Marwa Rashad in London; writing by Jason Neely, editing by Carmel Crimmins and Tomasz Janowski

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