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Nord Stream 1 Impacts and Outlook

This short policy note summarises the price and policy reaction to reduced Nord Stream 1 flows of Russian gas to Europe, and the outlook for gas storage filling ahead of winter

  • Gazprom has announced that it would reduce deliveries of Russian gas to Europe through the Nord Stream 1 pipeline from 27th July to 33 mcm/d (~20% of capacity), down from about 62 mcm/d in recent days, for an unknown duration
  • European gas prices jumped following the announcement, closing in on record highs set shortly after the start of the Russia-Ukraine war
  • Gazprom has not redirected lost NS1 volumes through other import routes, and is not likely to make up for missing volumes via other sources of supply
  • The reduction will make it more difficult for EU member states to reach their storage targets of 80% full by 1st November, and harder for those countries that have set even higher targets, such as the 95% set by Germany
  • However, member states were in total as much as 3 bcm ahead of their 1st September intermediary stock target, which would be enough to offset the reduction in Russian gas imports, even if reduced NS1 flows continue until 1st November
  • The EU has also committed to voluntarily reducing winter gas demand by 15% (~45 bcm) in 1 Aug-22 to 31-Mar-23, which would more than offset the drop in NS1 flows
  • The measures could include reductions of gas consumed in power sector, fuel switch in industry, national awareness campaigns to reduce consumption, targeted obligations to reduce heating and cooling and market-based measures such as tenders or auctions to cut consumption
  • Member states will be able to implement measures of their own choosing, and the EU has outlined several exemptions and possibilities to request a derogation from the reduction target
  • The target is ambitious and contentious, with several member states opposed to the original proposition. It could require substantial reductions to industrial activity if governments seek to preserve gas use by households and other protected customers


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