Nord Stream 1 gas supply cut aimed at sowing uncertainty, Germany warns

© Reuters. FILE PHOTO: Pipes at the landfall facilities of the 'Nord Stream 1' gas pipeline are pictured in Lubmin, Germany, March 8, 2022. REUTERS/Hannibal Hanschke

By Madeline Chambers and Christoph Steitz

BERLIN (Reuters) -Russia's Gazprom (MCX:GAZP) on Wednesday announced a further cut in the amount of gas it can pump through the Nord Stream 1 pipeline to Europe, a move Germany's economy minister said was aimed at sowing uncertainty and pushing up fuel prices.

The second supply capacity cut in as many days means that Nord Stream 1 will run at just 40% capacity. Gazprom initially blamed delays getting Siemens Energy equipment that is undergoing maintenance in Canada, which Germany's energy regulator said does not explain the cut.

Uniper, Germany’s biggest importer of Russian gas, said deliveries from Russia were down a quarter from agreed upon volumes.

British and Dutch wholesale gas prices rose after Gazprom's warning, the latest example of how the energy market has become central to the economic war between Moscow and the West since Russia's invasion of Ukraine on Feb. 24.

Gazprom on Wednesday said it was further scaling down the use of Siemens-made equipment at the Portovaya compressor station near St Petersburg.

"The Russian side's argument is simply a pretext. It is obviously a strategy to unsettle and drive up prices," German Economy Minister Robert Habeck said in a statement following the latest cut, which will limit Nord Stream 1 flows to 67 million cubic metres per day.

Gazprom has not immediately replied to a request for comment.

The Dutch front-month contract was up 16.7 euros at 113.60 euros per megawatt hour (MWh) by 1518 GMT, its highest level since mid-May. The day-ahead contract was up 17.07 euros at 107.50 euros/MWh.

Flows via the Nord Stream 1 pipeline remained fairly stable at around 45 million kilowatt hours per hour up until 1700 GMT, data on Nord Stream's website showed.

Data from the website showed a sharp drop in nominations to around 29.6 million kilowatt hours per hour from 2100 GMT, in line with the pipeline running at 40% of its capacity.

UNIPER DELIVERIES DOWN

Uniper said its supplies from Russia were 25% below nominated volumes. It was able to procure missing volumes from other sources and was in touch with German authorities, it said.

Gas flows from Gazprom to Italy were down by about 15% on Wednesday from the previous day, said ENI (BIT:ENI)..

Gazprom has been demanding that its buyers in Europe pay for gas in roubles.

While Germany's Uniper and RWE have paid under a new scheme proposed by Moscow to ensure a continued supply of the fuel that is essential critical to Europe's top economy, Gazprom cut supplies to some others, including Denmark's Orsted (OTC:DOGEF) and Shell (LON:RDSa) Energy.

The latest move highlights the challenge faced by Germany, which depends on Russia for most of its natural gas, to find suitable alternatives to an energy supplier Europe's largest economy needs but no longer wants.

It is also expected to make it much harder to fill Germany's gas storage facilities, which currently stand 55.6% full but need to be at 80% by October and 90% in November to get the country through the winter should Russia stop supplies.

"We can currently buy the necessary quantities from the market, albeit at higher prices," Habeck said, adding that while supply was secure, saving energy was the order of the hour.

"Of course we will take measures on a state level if needed," he said, a day after Germany decided to put Gazprom Germania, which Russia pulled out of in April, under long-term administration and back it with a 10 billion euro ($10.4 billion) loan.

($1 = 0.9606 euros)