GAZPROM FULFILLS ITS CONTRACTS

PLATTS -  07 Feb 2022 - The European Commission has intensified its criticism of Russia's behavior on the European gas market and continues to look to global LNG suppliers in a bid to reduce its dependence on Russian gas. 

EC President Ursula von der Leyen has in recent days attacked Russia and state-controlled gas supplier Gazprom for not supplying more gas to Europe.
"It cannot be ruled out that the Kremlin will continue to use gas as a threat, and that is why we must become more independent," von der Leyen was quoted as saying Feb. 7 at an online conference organized by several German media outlets. 

And in an interview posted to the European Commission YouTube channel, von der Leyen said that while any disruption to Russian gas supplies to Europe amid the standoff over Ukraine would be a "severe situation", Europe was looking at ways to mitigate the impact. 

"We have done our homework and we are working intensively to be prepared for such a situation," she said. 

"We are able to receive LNG from other suppliers worldwide. I've created a partnership for energy security with [US] President Biden. We have spoken to many different LNG suppliers worldwide who are very interested in going into the gap that Russia would leave," she said. 

Low Russian supplies to Europe in recent months have contributed to record-high gas prices. 

The TTF day-ahead price hit an all-time high of Eur182.78/MWh on Dec. 21, an increase of 985% year on year, according to S&P Global Platts price assessments. 

Prices have cooled since, though they remain at historic highs. The TTF day-ahead contract was assessed Feb. 4 at Eur81.85/MWh, still a year-on-year increase of 355%. 

Von der Leyen also pointed to a "robust and comprehensive" package of sanctions that the EC could impose on Moscow should Russia invade Ukraine, including on limiting Russia's access to the EU financial system. 

Russia, she said, has a "very one-dimensional" economy focused on fossil fuels that would be impacted by such a package of sanctions.

Contractual obligations

Russia and Gazprom have denied deliberately withholding gas from Europe, saying repeatedly that they are supplying gas to Europe in line with contractual obligations. 

However, the level of stocks in Gazprom sites in Europe is low and there have been no spot sales on the company's Electronic Sales Platform since October. 

In an interview published Feb. 4 with Les Echos and Handelsblatt posted to the EC website, von der Leyen blamed Gazprom for the current low level of storage in Europe. 

"Last summer and autumn, the reserves were not fully replenished as usual, in particular by Gazprom," she said. 

She did acknowledge, however, that Gazprom was fulfilling its contracts, "but only at the bottom end of its commitments." 

"Other gas suppliers have increased their supply significantly in response to soaring demand and record prices, but Gazprom has not. The company, which is owned by the Russian state, has thus cast doubt on its own reliability," von der Leyen said. 

"The way Gazprom is doing business is strange. At a time when gas prices are going through the roof and there is huge demand, the company is restricting supply to its customers." 

Von der Leyen also reiterated the EC's position that the Nord Stream 2 pipeline could face sanctions in the event of an escalation of the Ukraine crisis. 

"Russia is exerting military pressure on Ukraine and using gas supplies as a means of putting pressure on us. That is why it is quite clear that Nord Stream 2 cannot be removed from the table as far as sanctions are concerned," she said. 

The 55 Bcm/year pipeline was completed in September, but has yet to begin commercial operations due to delays in the process for certifying the pipeline operator. 

The Kremlin has repeatedly said that approval of Nord Stream 2 would help ease the tight gas market situation in Europe.

LNG suppliers

Concern over Russian gas supply to Europe has seen the EC make significant diplomatic efforts in recent weeks to seek additional gas deliveries from alternative suppliers. 

EC energy commissioner Kadri Simson has held talks with LNG powerhouse Qatar and Azerbaijan -- supplier to the Southern Gas Corridor -- in the past week. 

Von der Leyen said the EC was talking to many different suppliers across the world. 

"A lot of countries are very interested in developing good, long-term cooperation with Europe. And Europe wants and offers reliability," she said. 

"In principle, we are talking to all of them, starting with Norway, a supplier we already have a long, dependable working relationship with. But also with Qatar, Azerbaijan and Egypt. And of course the US also plays a major role," she said. 

"In the talks we are having at the moment we can see how eager other suppliers are to jump in to fill that gap. So it is in the Kremlin's own interest to rebuild the broken trust in its relations with Europe." 

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