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Gazprom PJSC said Friday that it discovered an oil leak on equipment that would prevent it from resuming natural gas deliveries on Nord Stream 1 (NS1) until repairs can be made, dealing a blow to Europe’s already tight market.
The 6 Bcf/d, 745-mile system, which has been operating at 20% capacity since July, was taken offline Wednesday for work on the sole turbine feeding the pipeline. Gazprom said it discovered an oil leak impacting various parts of the unit during maintenance work it was carrying out with Siemens AG, thwarting a restart planned for Saturday.
“The complete elimination of oil leakage on these engines is possible only in the conditions of a specialized repair shop,” Gazprom said in a statement on Telegram shortly after European gas markets closed.
European officials did not expect the company to resume deliveries this weekend as flows have been curbed throughout the summer. Gazprom has taken all eight of the turbines feeding NS1 offline this year, previously blaming overdue maintenance on Western sanctions against Russia for preventing key equipment from arriving for repairs.
Record high LNG imports and strong Norwegian imports have helped the continent fill its storage inventories to 80% of capacity two months ahead of schedule. Demand has also been dented by high prices. That will provide a cushion, but “Europe is going to face a very difficult winter” regardless of whether NS1 returns to service, said Jason Feer, global head of business intelligence at Poten & Partners.
Feer said “the writing is on the wall” that absent adequate supplies this heating season the continent would have to ration gas supplies and prioritize which consumers receive it first.
He told NGI that government officials are now also likely to decide whether to preserve current gas and LNG stocks immediately to make inventories last longer this winter.
In an analysis published Thursday, Wood Mackenzie said if NS1 does not come back online and severe cold arrives this winter, European storage inventories could be cut to just 4% by March and leave the continent short of its goals heading into the 2023-2024 winter.
Title Transfer Facility prices surged above $100/MMBtu late last month when power prices skyrocketed and fears mounted as NS1 maintenance drew closer. They fell by about 40% this week in the biggest drop since April as rising storage inventories eased supply concerns.
However, Gazprom’s announcement sets the stage for a climb higher as the cat-and-mouse game continues. While Russia has plenty of capacity on other routes to serve Europe, it was only delivering about 1.3 Bcf/d to the continent through Ukraine on Friday.
Feer said there is a chance Russia could bring NS1 back online sooner rather than later to preserve leverage and keep revenue from sales flowing.
“Turning the gas off, turning it on, turning it off, forces the Europeans to pay attention to the Russians.”
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