Europe’s gas supplies suffered a double blow on Tuesday after a major US liquefied natural gas export terminal said it would be offline for at least three months and Russia said it would cut flows through a key route to Germany.
Freeport LNG, which accounts for about a fifth of US LNG exports and about 10 percent of Europe’s imports this year, said on Tuesday that repairs following an explosion at its plant last week could take until the end of the year, with only partial activity set to resume after 90 days. Last week Freeport had indicated the terminal would resume operations in early July.
At the same time, Russia said it would reduce capacity on the Nord Stream 1 pipeline to Germany by about 40 percent, blaming the reduction on the delayed return of a key piece of technical equipment that Siemens Energy said has been blocked by Canadian sanctions against Moscow.
The twin threat to European gas imports illustrates the ongoing vulnerability of the continent to supply disruptions as it tries to reduce its reliance on Russian gas following Moscow’s invasion of Ukraine in February.
European benchmark gas prices jumped more than 15 percent to €99 per megawatt-hour, while UK gas contracts for delivery in July jumped 25 percent to 21.97 per therm, with traders warning of tighter supplies in the months ahead.
In contrast US natural gas fell by more than 15 percent on the news, as traders digested the longer-than-expected outage from the Freeport terminal — a major source of demand for the fuel — with the front-month contract for Henry Hub selling for about $7.20 per million British thermal units.
Gas prices in Europe have soared in the last year after Russia squeezed supplies ahead of the invasion and as fears of supply, disruptions grew, stoking inflation and a cost of living crisis for many countries.
The EU has tried to avoid directly targeting Russian gas flows with sanctions — which prior to the invasion made up as much as 40 percent of all of its supplies even as it has moved to cut its dependence.
But Germany’s Siemens Energy said on Tuesday that gas turbines it supplied to Russia’s Gazprom to help compress gas on the Nord Stream 1 pipeline had been held up by Canadian sanctions after undergoing maintenance at its factory in Montreal. Ottawa last week extended its punitive measures against Russia to prohibit providing technical services to the Russian oil, gas and