Russia Says Nord Stream 2 Clearance May Cool Gas Prices in Europe

MOSCOW (Reuters) — Russian Deputy Prime Minister Alexander Novak said on Wednesday that certification of the Nord Stream 2 undersea gas pipeline, which expects clearance from a Germany's regulator, could cool soaring European gas prices.

Prices have spiked in response to a recovery in demand, particularly from Asia, when storage levels are low.

European benchmark Dutch wholesale gas for November has jumped almost eightfold since the start of the year and reached an all-time high of over 150 euros per megawatt hour (MWh) in the early hours of Wednesday.

It reversed gains and fell to 114 euros by 1500 GMT.

"I think there are two factors, which could somewhat cool off the current situation. First of all, of course, this is, definitely, completion of certification and the fastest clearance for gas supplies via the completed Nord Stream 2," Novak told a meeting of government officials and heads of energy companies.

Nord Stream 2, which runs on the bed of the Baltic Sea from Russia to Germany, is expecting certification from Germany, which could take a few months. The pipeline has faced resistance from the United States, which says the project will increase Europe's reliance on Russian energy.

Novak said an increase in gas sales on Gazprom's Electronic Sales Platform could also calm prices. Gazprom set up the ESP in 2018 for gas sales to Europe to supplement the existing long and mid-term contracts. It has suspended gas sales for delivery in 2022 since late August.

President Vladimir Putin, who chaired the meeting, has agreed with the proposed increase, adding that Russia should meet its domestic gas needs first.

Novak said some speculative trade could also be behind the soaring gas prices, which he said did not reflect the fundamentals of supply and demand.

Igor Sechin, head of oil giant Rosneft, at the meeting asked Putin for the right to export natural gas from Russia. State television did not air Putin's reaction to the request.

LONG-TERM DEALS

Putin told the meeting that Europe was wrong to reduce the share of long-term deals in natural gas trade in favour of the spot market instead, where prices have surged.

"We talked to the European Commission's previous lineup, and all its activity was aimed at phasing out of so-called long-term contracts," he said.

"It was aimed at transition to spot gas trade. And as it turned out, it has become obvious today, that this practice is a mistake."

Russian gas group Gazprom has resisted moving to spot trade in Europe, preferring long-term deals, which sometimes last around 25 years.

Putin also reiterated that Russia has been a reliable energy supplier to Europe, which may see record-high Russian gas exports this year as Moscow is increasing gas supplies, including via Ukraine, in response to the energy crunch and stands ready to stabilize the market.

He said that Russian gas transit via Ukraine is set to exceed volumes agreed under Gazprom's contract with Kyiv.

KREMLIN DENIAL

Earlier on Wednesday, Putin's spokesman Dmitry Peskov said that Russia had absolutely no role in causing Europe's surging gas prices, following accusations from the International Energy Agency (IEA) and some in the European Parliament that Russia had not done enough to increase supplies to Europe.

"There are a couple of reasons (behind the gas crisis) - the way the economy is recovering, how demand for the energy resources is growing, as well gas storages are not filled in," Peskov told reporters on a daily conference call.

Putin also cited economic recovery and cold weather in Europe, which led to a reduction in gas storage as another reason behind the gas prices surge.

Peskov said Moscow was ready to discuss new long-term contracts for gas sales to European consumers and that Gazprom was meeting all its obligations.

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