Europe Gas Prices Surges After Gazprom Restricts Nord Stream Supplies And U.S Freeport LNG Announces Longer Disruption

European natural gas prices surged over fears of imminent disruption after Russian gas behemoth Gazprom announced it would restrict gas supply through Nord Stream 1 due to technical issues related to turbines in Nord Stream curbed supply through and LNG Freeport, a major export terminal in the U.S., said that a key plant would remain shut for three months.

Russian gas major Gazprom has announced a 40% reduction in natural gas deliveries to Europe via the Nord Stream pipeline, blaming German engineering giant Siemens for failing to restore key turbines "on time".

Gazprom deploys Siemens' turbines at Nord Stream's Portovaya compressor station on Russia's Baltic Sea coast to maintain the necessary pressure in the system to pump gas. Siemens has withdrawn its services and maintenance support for Russia to comply with European sanctions against the country following Russia's invasion of Ukraine.

"Due to the delayed return of gas compressor units from repair by Siemens ... and technical engines' malfunctions, only three gas compressor units can currently be used at the Portovaya compression station," Gazprom said.

The Portovaya station has a 366-MW capacity and a 220-atmosphere absolute pressure. It comprises eight gas-pumping units (GPUs) - six with a 52-MW capacity and two with a 27-MW capacity.

Siemens Energy said that turbines were manufactured in Canada and needed to be periodically sent back for maintenance, adding one of the turbines was currently being overhauled in Montreal.

"Due to the sanctions imposed by Canada, it is currently impossible for Siemens Energy to deliver overhauled gas turbines to the customer. Against this background we have informed the Canadian and German governments and are working on a viable solution," Siemens said.

In another setback, Freeport LNG, one of the largest U.S. export plants producing liquefied natural gas (LNG), announced that full plant operations is not expected until late 2022. The plant on Quintana Island was shut last week following an explosion.

Gazprom has also not indicated that it will increase gas supplies to Europe across Ukraine to compensate for the loss of volumes via Nord Stream.

Freeport LNG

Freeport LNG had initially indicated that the plant would be closed for three weeks following the accident.

"Given the relatively contained area of the facility physically impacted by the incident, a resumption of partial operations is targeted to be achieved in approximately 90 days, once the safety and security of doing so can be assured, and all regulatory clearances are obtained." the company said in a statement on Tuesday (Jun 14).

The facility operates three LNG trains capable of producing approximately 15 million tonnes per year (mtpa) of LNG.

The US, the world's biggest natural gas producer, is trying to lure European nations away from dependence on Russian Gas. LNG exports hit a record 9.7 bcfd last year, according to the U.S. Energy Information Administration (EIA).