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    Gazprom halts Dutch gas supply


Denmark also expected to lose access to Russian gas imports.

by: Callum Cyrus

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NGW News Alert, Natural Gas & LNG News, Europe, Political, Territorial dispute, News By Country, Russia

Gazprom halts Dutch gas supply

Gazprom is suspending gas deliveries to the Netherlands, Dutch gas firm GasTerra said on May 30.

The Netherlands will on May 31 become the fourth European country to lose access to Russian gas. GasTerra has declined to comply with the Kremlin's March 31 decree, which requires customers in "unfriendly countries" to open accounts at state-owned Gazprombank, for the exchange of their bills into rubles.

Finland's Gasum was cut off by Gazprom earlier this month, in a move that exposed that country's heavy exposure to Russian gas. Gazprom Export earlier also blocked gas deliveries to Poland and Bulgaria.

In light of the decision, GasTerra will no longer receive around 2bn m3 of gas it was due to purchase under its current supply agreement. The agreement was supposed to lapse on October 1, 2022.

GasTerra says the rubles demand posed a "risk of violation" of EU sanctions. It also cites numerous financial and operational risks, not least exposure to Russia's legal framework, as Gazprombank is registered in Moscow.

The loss of Russian gas supplies should be manageable without detriment to the Dutch consumer, GasTerra claims, though it conceded it could impact supply/demand balances in European gas markets.

As with many of its EU peers, GasTerra claims Moscow's writ is illegal as euro and dollar-denominated payments should have been enforced under the terms of its supply agreement.

The Netherlands purchases around 15% of its gas supply from Russia, according to the NL Times. It relies heavily on natural gas for heating, with around 92% of Dutch households using gas to warm their homes, according the Dutch Central Bureau of Statistics.

Dutch gas output came to 20bn m3 in 2020, down significantly from 75.3bn m3 ten years previously, owing to the phased closure of the giant Groningen field. Groningen is due to close completely in 2023.

In the longer term, Dutch gas infrastructure operator Gasunie plans to build an 8bn m3/yr LNG import terminal at Eemshaven, close to the existing Groningen infrastructure. Its existing LNG import plant, Gate LNG, will have its nameplate capacity expanded to 16bn m3/yr by 2026, from around 12bn m3/yr at present.

Gazprom is also expected to cut off gas deliveries to Denmark. Danish energy company Orsted said May 30 that its payment deadline was today and it proposed to continue payments in euros. Copenhagen's governing coalition has vowed to end Russian gas imports as soon as possible. Additional gas flows to Denmark will be delivered from October this year through the 10bn mBaltic Pipe, which is set to link Norwegian gas to Poland via the Danish transmission grid.

Denmark's energy authority Energistyrelsen has reassured consumers there is adequate gas supply to cover the loss of Russian imports. Moreover, Gazprom is unable to stop Orsted's gas purchases immediately, as there is no direct pipeline route from Russia to Denmark, Orsted said.

In addition to the Baltic Pipe, Denmark's Tyra gas and condensate project will relaunch next year following a four year hiatus. The TotalEnergies-operated project is expected to yield around 60,000 barrels of oil equivalent/day for the next 25 years.

Orsted will also support security of supply by filling up storage centres in Denmark and Germany, and it reduced its hedge exposure to Gazprom Export quantities in the first quarter. Danish gas stores held around 4.9 TWh as of May 29, equating to around 51% of national storage capacity. Orsted says Gazprom Export's decision will not alter its financial outlook for the current year, nor any of its strategic or long-term financial parameters.