Medvedev sees European gas price hike

Europeans will "soon be paying" €2,000/'000m³ for their gas, former Russian president and deputy chairman of Russia's security council, Dmitry Medvedev, said today.

European consumers will enter a "brave new world" following Germany's decision earlier today to halt certification of the 55bn m³/yr Nord Stream 2 pipeline, Medvedev said.

Russia has repeatedly rejected accusations by the European Commission and agencies such as the Paris-based IEA that it has used energy as a weapon by withholding gas from Europe.

The Nord Stream 2 certification process was already expected to be pushed into at least the second half of this year, with no guarantee of a positive decision.

And it is possible to ship much more Russian gas to Europe than has been sent in recent months using existing supply routes, with deliveries to Europe through Poland and Ukraine holding well under capacity this winter.

Nord Stream 2 would not necessarily provide additional gas for Europe, but simply provide an alternative route for the same gas. Higher receipts of Russian gas depend on the nominations of Gazprom's buyers, and on available supply for Gazprom to export.

The price for a contract with front-month delivery at the TTF, Europe's benchmark gas hub, had by mid-afternoon jumped by around 10pc from yesterday's close, but was still well short of the level projected by Medvedev. Prices last approached €2,000/'000m³ in late December 2021, but fell early this year following an influx of LNG deliveries, and mild and windy weather that weighed on gas consumption across much of Europe.

"We are not for high prices, we are for stable deliveries," Russian energy minister Nikolai Shulginov said in an interview published by the ministry as recently as yesterday. High prices are "absolutely unprofitable for Gazprom and Russia, because consumption continues to decrease, the volume of purchases decreases, and the economy slows down", he said.

"The EU needs to increase gas supplies and use the capacities of Nord Stream 2, because this will create a surplus in gas supply" that would allow Europe to refill its depleted storage facilities and avoid a repeat of the record price surge in 2021, Shulginov said.

If firms do not secure long-term contracts with Gazprom, the alternative is much more costly LNG, Shulginov said. "Does that mean Europe will shoot itself in the foot?" he asked.

By Brendan A'Hearn