Four leaks were discovered in the Nord Stream 1 and Nord Stream 2 AG underwater gas pipelines from Russia to Germany last week, resulting in a massive methane release estimated by Umweltbundesamt – German Environment Agency of 300k tons, equivalent to 7.5M tons of CO2 emissions. Ouch.
A root cause investigation is ongoing, but seismic readings indicate explosions. Stay tuned for more information; for now, the E.U. & NATO are stating sabotage, and Mr. Putin is blaming “Anglo-Saxons.”
What is known is that 55B cubic meters of gas delivery capacity to Europe (for just Nord 1) are out of commission for the foreseeable future. Even if the damaged sections are repaired, salt water in gas pipes can’t be good. Then there is the question if Russia wants to deliver gas. Since June, Russia has been cutting deliveries by about 75%, citing “maintenance” and “equipment” problems. Siemens Energy, which has the contract to operate the pipeline, disputed Russia’s claims, maintaining the pipelines have been operable this summer. Nord 2, completed last fall after a decade of construction, never started operating, and Germany suspended its environmental certification after Russia recognized Donetsk and Luhansk republics in Feb.
Short-term implications:
Energy prices will continue spiking in Europe, and industrial production of energy-intensive industries like steel and concrete will be curtailed. LNG imports will be further hastened. Planned decommissioning of selected coal and nuclear facilities will be slowed, and some offline coal plants will be temporarily restarted. More wood will be burned in homes for heating. Mostly bad for the environment.
Longer-term implications:
Europe was already moving toward renewable energy with wind, solar, and storage complimenting hydroelectric power, and electrification and fuel switching of loads like heat pumps for space and water heating. The Nord Stream catastrophe can only accelerate those transitions. LNG for power or water heating is much more expensive than renewable energy, so even if LNG use is temporarily increased, economics will drive toward renewables with storage, further amplified by energy security considerations. More electric transmission, interconnecting Europe’s national grids, may be accelerated.
Nord 1 & 2 cost about 10-15B Euro each; equity partners included Gazprom, Uniper, Wintershall Dea, OMV, ENGIE, Shell and debt was covered by several international banks. Shell has already written off part of the NS2 investment. Hard to imagine future energy projects with Russia supported by western partners & banks.
Crazy times. Renewable solutions to decouple fossil fuel volatility cannot come fast enough. European countries need to accelerate the permitting process for renewable, storage, and transmission projects, and respective industries will do their part.
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Shug
