Gazprom says unable to meet greater Europe gas demand

MOSCOW/LONDON Sat Feb 4, 2012 1:38pm GMT

General view of the headquarters of Russian gas export monopoly Gazprom in Moscow March 3, 2008. REUTERS/Sergei Karpukhin

General view of the headquarters of Russian gas export monopoly Gazprom in Moscow March 3, 2008.

Credit: Reuters/Sergei Karpukhin

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MOSCOW/LONDON (Reuters) - Russian gas exporter Gazprom has brought supplies to Europe back up to normal after reducing them "for a few days," but it is unable to meet increased demand amid freezing weather, a company official told Russian Prime Minister Vladimir Putin on Saturday.

European countries had reported that Gazprom, which responsible for around a quarter of European Union's natural gas imports, reduced supplies to them due to a biting cold front, while they also requested more fuel for heating.

Gazprom has been saying it had not breeched any contractual obligations. But on Saturday its chief financial officer, Andrey Kruglov, told Putin the company had cut gas supplies to Europe by up to 10 percent for a few days before returning them to normal levels.

However, the company cannot supply more gas, he said.

"We see that they are requesting more... But Gazprom at the moment cannot supply the extra volumes our West European partners are asking for," Kruglov told Putin.

The shortfall in supplies was a reminder of the Russian gas supply halts to Europe at the height of winter in 2006 and 2009 due to a spat between Russia and Ukraine, which stands on the gas transit route to the EU, over pricing.

Ukraine has been asking Russia again to lower its gas prices, threatening a similar standoff. On Friday a Gazprom official said that Ukraine must be taking more gas than its contracted share.

Last year, Gazprom increased its gas supplies to Europe to 150 billion cubic metres (bcm) from around 138.6 bcm in 2010. It is aiming to ramp up those volumes to around 164 bcm this year thanks partly to the underwater Nord Stream pipeline commissioned last November.

Nord Stream's initial capacity stands at 27.5 billion cubic metres a year, which may be doubled by the fourth quarter.

Russia is also pushing for a South Stream pipeline to rival the EU-backed Nabucco and other supply lines. Moscow plans to ship over 60 bcm of gas to Europe via South Stream starting from 2015.

"I hope that we will finish the work on the Northern route, the Nord Stream, and will start more active work on the Southern (route)," Putin said in TV reports on the meeting, a transcript of which was posted at the government web site: here

Gazprom's pipeline gas, which has been sold for a record high price of over $400 per 1,000 cubic metres in Europe, has faced stiff competition from alternative, cheaper, fuel, such as liquefied natural gas (LNG) and gas on the spot market.

European companies struggling with high energy prices have put increasing pressure on Gazprom to boost the spot market pricing element in its long-term contracts.

A cold front blamed for more than 100 deaths is lashing the continent, bolstering demand for heating and forcing countries to tap stored gas supplies.

The European Union's executive said that squeezed supply of Russian gas to some EU countries fell further on Friday, but it added the situation had not reached emergency levels despite freezing temperatures gripping much of Europe.

Bulgaria's economy and energy ministry said on Saturday that Russia's supplies of natural gas to Bulgaria and neighbouring Greece, Turkey and Macedonia were back to normal. Grid operator Bulgartransgaz had said on Friday that supplies had dropped more than 30 percent as freezing temperatures drove up demand for heating in Russia and across Europe.

NORWAY SUPPLIES STABLE

In Britain, which relies heavily on Norwegian gas imports, high demand for heating gas was met by sufficient supplies.

National grid expected demand to be just under 378 million cubic metres (mcm) on Saturday, around 63.5 mcm above the seasonal norm.

But despite these heightened needs, the system was stable with flows at 380 mcm, and no shutdowns reported in Norway.

The UK's Met Office issued a Level 3 Cold Weather Warning, which said that "there is a 100 percent probability of severe cold weather/icy conditions/heavy snow between 1000 (GMT) on Saturday and 1000 on Wednesday in parts of England."

(Additional reporting by Gwladys Fouche in Norway)

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Comments (1)
mgb500 wrote:
This is rather a disturbing remark…not being able to supply more gas. Either it’s a prelude to a price hike or overall quantities available have peaked or perhaps falling…

Feb 04, 2012 3:34pm GMT  --  Report as abuse
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