Gazprom stops NS1 supplies indefinitely

RUSSIA ENERGY / FINANCE - In Brief 05 Sep 2022 by Marcel Salikhov

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After the technical maintenance of the last operating gas compressor unit at the Portovaya station Gazprom decided to stop gas transportation through Nord Stream 1 due to detected malfunctions. Since the end-July Gazprom has used only one out of eight turbines at Portovaya. So NS1 utilization was roughly 20% of its nominal capacity. In August NS1 transported ~34 mcm/day on average. So there are only two routes for the Russian gas supplies to the EU left. Transit via Ukraine is around 41-42 mcm/day on average. Supplies via the Balkan stream pipeline (transit through TurkStream) are 40-43 mcm/day. So in total, it's about 81-85 mcm/day, or 29-31 bcm annually. Chart 1. Supplies of natural gas from Russia to the European market by different routes, January, 1 - 2020 - September 3, 2022 Source: IEF calculations based on ENTSOG data  We expect that Russian pipeline gas exports to the EU in 2022 will be ~65 bcm vs 135 bcm in 2021. The difference is 70 bcm that have to be substituted by alternative supplies or not consumed. NS1 halt will deprive Gazprom of ~4.3 bcm exports this year. Effect in terms of revenues is dependent on the price of remaining exports. Today European gas prices surged by more than 30% on the news. Such price effect potentially gives an opportunity to compensate for ~25% reduction in physical volumes by the price increase. But we note that the effective prices for Gazprom are lower than TTF spot and still have a share of oil indexation, i.e. not dependent on spot market surge. As we have argued earlier, the complete `divorce` is getting closer. It's the future for Gazprom without fat margins on the EU market. It's the future for the EU with structurally hi...