The importance of Russian gas supplies to the rest of Europe was
again underlined on January 18 as Gazprom was forced to cut exports
to a number of central and southeast European countries as gas
demand in freezing Russia soared to 40% above predicted levels. As
EiEE went to press, temperatures in Moscow remained below minus 30
degrees Celsius but electricity consumption was at record
post-Soviet Union levels.
Although Gazprom maintains that it is fulfilling its contractual
obligations, supplies were reported to be down by as much as 25% in
Hungary, Bosnia and Herzegovina, Croatia, Serbia and Montenegro, and
even by around 12% in Italy. Gazprom claims that its contracts with
gas import companies in Europe allow for fluctuations depending on
market conditions and that it was maximizing production and making
available as much transportation capacity and withdrawing as much
gas from storage as possible.
In response to the crisis, Russia's energy and industry minister
Viktor Khristenko said on Jan 19 that the government was ready to
allow the use of strategic fuel reserves should the cold snap
continue for much longer.
The authorities have also taken steps to limit energy consumption
by non-essential power users. Many schools and businesses remain
closed. And in Hungary, which was one of the countries worst hit by
the supply restrictions, oil and gas company MOL told its major
customers - mostly power stations - to switch to oil from gas. MOL
was still reporting that supplies were 20% down as EiEE went to
press on Jan 19.
Moscow also decreased on January 18 volumes it exported to
Ukraine, which transports most of Russia's European gas exports. A
spokesman for Ukraine's state-owned Naftogaz Ukrayiny said Russia
was contracted to deliver 350-mil cu m/day of gas to European
customers but would usually pump around 40 -mil cu m/day more than
that. "In the cold snap on January 18, volumes fell back to 350-mil
cu m," he said. He said Naftogaz was forwarding all of the gas on to
European customers despite the fact that Kiev was also suffering
from cold weather and had been taking additional gas from the
pipeline with Gazprom's permission.
Italy's Eni said that it had been forced to take from gas storage
as daily supplies were running at around 6.8% less than normal at
70-mil cu m on January 18 and were expected to be down 12.2% on Jan
19. In Serbia, supplies were reported to be 25% down - with the
country receiving 7.5-mil cu m/d instead of the average 10-mil cu m.
Croatia reported a fall of 10% in supplies, while Slovakia's SPP
told EiEE that there had been a "moderate reduction".
The resumption of gas exports to normal levels by January 22
would depend on outside temperatures and "on how much Russia's own
demand in gas will be," a Gazprom spokeswoman said. On January 18,
Gazprom declined to address the reduction in gas supply to Europe,
saying it continued to meet its obligations to its western partners
amid significantly increased domestic demand. "Gas deliveries to
European consumers continue to exceed contracted volumes by 7%,
while shipments to Russian consumers were raised by 40% above the
planned levels," Gazprom said.
Gazprom said gas deliveries have been carried out in full
accordance with customer contracts, but that the company's upstream
and transportation facilities were operating at maximum capacities.
Gazprom also said it had registered record daily volumes of gas
being taken from its underground storage facilities.
Earlier on Jan 18, Russian power monopoly UES said Gazprom had
warned power companies in the European part of Russia that it might
reduce gas deliveries by up to 50% because of the cold weather.
Gazprom started limiting gas supply to Russia's power utilities on
Jan 17, UES chief Anatoly Chubais said in televised comments. He
said unusually cold weather caused a spike in electricity demand and
the power system was working at a peakload of 148 TWh, a 15-year
record. "The situation is very difficult. And it has become more
difficult since gas supplies had been reduced," Chubais said, adding
he expected the cold snap and supply shortages to continue until at
least Jan 23.
Moscow's power utility Mosenergo said on Jan 19 that it had
started using reserve capacity at a number of power plants to
provide additional generation and reduce power cuts for a number of
industrial consumers. Total reductions in power supplies to
industrial consumers in Moscow and the Moscow region may exceed
January 18 levels by 40MW, UES said. All limitations have been
agreed upon with consumers and local government. "These emergency
measures are being taken in order to prevent possible disruptions in
the energy system," the company said.
Meanwhile, nuclear power operator Rosenergoatom said it had
lifted capacity limits at its power plants. Rosenergoatom was
operating 27 nuclear power units, at total capacity of 20,048MW, on
Jan 19. Also on Jan 19, grid operators were forced to reduce
capacity on the 1,300MW Russia-Finland electricity interconnector by
395MW, because of extreme pressure on the Russian power grid.
The big freeze was brought by a cold front from West Siberia,
where the temperature dropped to minus 50 degrees Celsius last week.
On Jan 16, temperatures in Moscow plummeted from around zero to
minus 20 degrees Celsius and plunged to minus 30 degrees Celsius on
Jan 18.
The forced reduction in exports is unfortunate for Gazprom,
coming as it did so soon after the interruption caused by the
pricing dispute with Ukraine. Although the drop in supplies is for
operational reasons - such a freeze is estimated to happen only once
every 25 years - it nonetheless reminds European consumers and
governments that no single source of energy supply is completely
reliable and that supply security comes from diversity.
"In the long-term this may affect Europe's plans to buy quite as
much gas from Russia as previously thought and encourage a more
positive outcome to the nuclear debate in the key consuming
countries of the UK and Germany," commented UFG's Stephen
O'Sullivan. Although the reduction in supplies is inconvenient, it
is unlikely to affect Gazprom's finances, however. "Even if the
reduced volumes are not made up over the balance of 2006 - which we
believe that they will be - Gazprom's deliveries to Europe are
likely to be just 0.5% lower than expected," O'Sullivan added.
Some investors made the most of the gas shortfall - the price of
light heating oil rose by almost 2% in Europe boosting oil
suppliers. "Speculation that some of Enel's power stations in Italy
and other smaller power stations in Hungary would switch to heating
oil from gas boosted the price of the product, which is favourable
for MOL," energy analyst Peter Tordai of KHB said.
Meanwhile, Russia's federal agency head Sergei Oganesyan
reassured anxious oil traders on January 19 that crude production
would not be affected by the freezing temperatures in western
Russia. "Russia has always lived in a cold regime and it is not an
unforeseeable factor," he said. Oganesyan said it was possible that
some companies may cut output slightly due to the cold weather, but
said the decline was unlikely to be significant.
Updated on: Jan 23, 2006
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