FEATURE: Europe counting down the days to Nord Stream's scheduled return

Europe is counting down the days until the Nord Stream gas pipeline is scheduled to end its planned annual maintenance shutdown on July 21, with the gas market on tenterhooks over whether the pipeline will resume operations.

Analysts have described July 21 as potentially the most important risk event for the European summer, with wide-reaching implications should flows be halted completely.

The key pipeline from Russia to Germany was already flowing gas at only 40% of capacity before its planned 10-day maintenance started on July 11, which reduced flow to zero.

Given Russian gas supply behavior over the past year -- including suspending deliveries to certain buyers and leaving its European storage sites empty -- fears are growing that the pipeline will not return as Moscow looks to heap more pressure on Europe.

Germany's economy minister, Robert Habeck, was among the first to raise the alarm over the Nord Stream maintenance, saying in June it was possible that Gazprom would not restart the pipeline after the work was completed.

This was echoed by Fatih Birol, executive director of the International Energy Agency, who said in late June that he would not rule out Russia continuing to "find excuses" to further reduce gas supply or even cut it off completely.

And the EU's commissioner for budget and administration, Johannes Hahn, was quoted by the Wall Street Journal as saying July 19 that the EC was working on the assumption that the pipeline would not resume operations.

A total halt in supplies via Nord Stream could well mean that the EU would fail to meet its storage filling targets and create more uncertainty on European gas markets ahead of the upcoming winter.

'Risk event'

Morgan Stanley said July 19 in a note that July 21 was "potentially shaping up as the most important/anticipated risk event for European (and perhaps global) risk markets over the summer."

However, the bank said its base case remained that flows would resume at pre-maintenance levels of 40% of capacity. This, it said, "would most likely be near-term bearish for gas prices versus current levels."

"Given market concerns regarding lower or zero gas flow through Nord Stream, we expect a relief rally due to de-risking of even greater gas supply disruption," it said.

Platts Analytics also expects flows to resume at the same rate as before the maintenance began, though it sees the risk of delays to the maintenance as still substantial.

There also remains the uncertainty regarding the return of a Nord Stream gas turbine from Canada.

According to a report July 18 in Russian daily Kommersant, the turbine -- which had been undergoing maintenance in Montreal and whose return was delayed by sanctions -- has been flown to Germany and will now travel by land to Russia.

Kommersant reported that the turbine could arrive at Portovaya on July 24, but after installation might not begin operations until early August.

Siemens -- the company that carried out the maintenance -- declined to comment July 19 on the turbine's current location.

Lower flows

Gazprom first flagged issues with Nord Stream flows on June 14 when it said it would cap supplies at 100 million cu m/d -- down from planned deliveries of 167 million cu m/d.

It said this was because Siemens had not returned the turbine that had been in Montreal for maintenance and also because of other technical issues.

Then on June 15, Gazprom said it had halted the operation of another Siemens gas turbine at Portovaya, limiting flows in Nord Stream to just 67 million cu m/d.

This, it said, was due to the time between maintenance periods having lapsed and was in accordance with instructions from the regulator, Rostekhnadzor.

The cuts in Nord Stream flows saw European gas prices surge back toward record highs seen in March in the immediate aftermath of Russia's invasion of Ukraine.

The TTF month-ahead price was last assessed at Eur156.43/MWh on July 18, up by 88% since before the cuts were announced in mid-June, according to Platts price assessments by S&P Global Commodity Insights.

It is conceivable that Gazprom could use the issues with the turbine as a reason to hold off on resuming operations at Nord Stream.

Jonathan Stern from the Oxford Institute for Energy Studies said July 19 his view was that the turbine would not be installed before the end of this week.

"If that's right, Nord Stream will either not start up -- which is the most likely scenario if they are getting ready to install the turbine -- or will start at the same level as before the maintenance," Stern told S&P Global Commodity Insights.

"The crucial point will come around the end of next week when the turbine should be back and installed," he said.

"At that point, Nord Stream should be back to full capacity and if it isn't this will add credibility to those who say that the whole turbine story is a pretext for the Russian government and Gazprom putting pressure on European gas supplies."