Promises, Parts, and Pipelines

The main natural gas pipeline between Russia and Germany has been shut down today for scheduled maintenance. Ordinarily, this would be no big deal. However, since Russia invaded Ukraine, everything has changed. Moscow has not been shy to use energy reserves as leverage during their almost 5-month long war. Just ask Poland and Bulgaria, who were cut off in late April.

The flow of gas is supposed to be stopped for ten days. However, many industry analysts warn to brace for a permanent shutdown. The enormous pipeline, which usually transports almost 60 billion cubic meters of gas annually, has already been slowed to 40% capacity. In comparison, Europe used 399 cubic meters of gas in 2020. Russia enacted the 40% cut after stating that an essential gas compressor unit was being held abroad due to sanctions imposed on them by Canada. Many in the west are calling this a form of energy blackmail.

Canada has recently capitulated and will return the essential component to Germany, hoping Russia will keep the gas flowing. As you might imagine, Ukraine’s energy and foreign ministries were unhappy about this decision and called for its reversal. They said that Canada was “bowing to the whims of Russia.” Explaining their reversal, the Canadian government stated that returning the equipment to Europe would support “Europe’s ability to access reliable and affordable energy as they continue to transition away from Russian oil and gas.”

Ok, ladies and gentlemen, I’m certainly no expert on the international oil and gas industry, but one has to wonder how giving Russia their part back so it can sell more gas to Europe is going to help wean Europe off of that gas. I’m not buying that as an excuse.

Canada has not mentioned how long it would be until they return the compressor unit. Still, the company doing the repairs, Siemens Energy, has put out a statement saying they were working to get it back to the Nord pipeline “as quickly as possible.”  

This made the Kremlin happy, and they issued a statement Friday saying that if the part were returned, they would increase gas supplies to Europe once more. If you are keeping score, that brings us full circle, and in reality, what we are looking at is a significant source of gas for all of Europe that is shut down for repairs and a promise from the Kremlin.

Preparing for the Worst

European ministers remain hopeful but aren’t shy about voicing their concerns that Russia won’t turn the gas back on after ten days. German Economic Minister Robert Habeck calls it a “nightmare scenario.” “Everything is possible; everything can happen,” he told Deutschlandfunk radio on Sunday. “We have to prepare for the worst.”

The French are a little more pessimistic. French Finance Minister Bruno Le Maire said a total cut-off would be “the most likely scenario.” But, he continued, saying, “it would be totally irresponsible to ignore this scenario.”   

Under the Sea

Natural gas from Russia is pumped under the Baltic Sea to Germany. From there, it is distributed to other countries in Europe. For years the European Union has talked about how it would be a good idea to wean themselves from dependence on Russian fuel, but in reality, many member nations still rely heavily on Moscow. For example, France gets 17% of its gas from Russia, and Germany, a whopping 35%.

Because of this, the German government is looking ahead to winter and is desperately trying to build its gas reserves before the heating season begins. Officials are advising citizens to take shorter, cooler showers and limit their use of air conditioning.

Germany has also announced that it will be reopening some of its coal-powered plants to provide electricity to its population.  There may be some lessons for the whole world here in terms of energy reliance on a single source like gas, coal, wind, or solar which can suffer from major supply chain problems and commodities price swings that affect the not just the price but whether energy will be available at all.

The only energy source without these endemic problems is nuclear power, which is zero emissions, reliable, unaffected by cold, heat, clouds or rainy weather, has the lowest cost per kilowatt generated and has been proven to be much safer than conventional fuels as long as it isn’t a badly designed and incompetently run graphite-moderated light water reactor operated by Russians.

Say what you want about the Fukushima Reactor, but it was a 50-year-old facility that still took an earthquake and a tsunami to bring it down. It was not due to a design flaw or operator error.  Just don’t build them on fault lines near the ocean where 45 waves can crash into it.