Ukraine shuts down Russian gas pipeline to Europe

The operator of the Ukrainian gas system GTS Ukraine (Gas Transport System of Ukraine) said on Tuesday that it would announce force majeure in the transportation of Russian gas through the Sokhranovka entry point to the border with Russia in eastern Ukraine, stopping flows. on May 11.

One-third of Russian gas transit through Ukraine to Europe passes through the Novopskov compressor station on the Soyuz gas pipeline, Reuters reports. According to Russia, 24% of Russian gas passes through it to the EU.

Ukraine continues to be a major transit route for Russian gas to Europe even after Russia invaded the country on February 24th.

GTS Ukraine said it could not operate at the Novopskov gas compressor station due to “interference by the occupying forces in technical processes.” The Novopskov compressor station is located in the Luhansk region of eastern Ukraine, occupied by Russian forces and separatist fighters.

It is the first compressor in Ukraine’s gas transmission system in the Luhansk region, a transit route for about 32.6 million cubic meters of gas a day, or a third of Russia’s gas going to Europe via Ukraine, GTS Ukraine reported. The capacity will be transferred to the Suja station, through which the rest of the EU passes.

To fully fulfill its transit obligations to the European partners and subject to the terms of the agreement, it is possible to temporarily transfer unavailable capacity from the Sohranvka physical interconnection point to the Suja physical interconnection point located controlled by Ukraine, “the gas operator said in a statement quoted by Reuters.

Gazprom told Reuters that diverting quantities through Suja was technically impossible. According to the company, there is no change in the control of the compressor station and the announcement of force majeure is not necessary.

The declaration of force majeure is the first since the start of the war and has led to a rise in natural gas prices in Europe in the afternoon trade to over 100 euros per megawatt-hour, according to June futures for the Dutch gas hub TTF. Before the news, the cent was around 92-93 euros per MWh, and earlier in the day it even fell briefly below 90 euros.

Spain and Portugal prepare “EU-approved” gas price cap over electricity bills

Spain and Portugal are preparing to approve a scheme today or Thursday at the latest, which should drastically reduce electricity bills and resolve the crisis that hit the Iberian Peninsula hard before the war in Ukraine.

This was written by Spanish media, citing comments from both governments and sources in power, hours after the European Commission sent (according to Madrid and Lisbon) its approval for this plan.

The explosion in the wholesale price of energy was the reason for the sharp increase in bills – an average of 102.38 euros per month per household in April at 191.7 euros price of electricity per megawatt-hour. According to yesterday’s data, the average wholesale market price on the Iberian Peninsula was 208.74 euros.

As early as October 2021, the average price of electricity reached 202.77 euros per megawatt-hour, in December – the unprecedented 360. The reasons were sought in rising oil and gas prices and the economic effects of the pandemic on consumption and tightening or loosening of restrictions. In December 2021, the household consumer bill averaged 134.45 euros – almost double the same month a year earlier.

What is the scheme

According to the mechanism, a ceiling will be set for the price of natural gas that supplies power plants. This would reduce by a third, or by some estimates, almost half the electricity bills of customers who rely on a regulated tariff and who have suffered the most from rising electricity prices over the past year.

Thus, in Spain and Portugal, the price of this fuel in the generation of electricity will go down from 80 to 40-50 euros per megawatt-hour. The reduction will be offset by consumers, but through a complex scheme which, according to the Spanish and Portuguese authorities, guarantees that they will not be affected in the end. Details need to be clarified, but if the system works, the average daily bill on the wholesale market should be reduced from € 200 per megawatt-hour to € 130-140 per megawatt-hour. There are also more conservative estimates, according to which the decline will amount to several tens of euros.

According to university professor Jose Luis Sancha, quoted by El Pais, the average household bill will fall from 100 euros a month in March to 50 euros in the first full month after the measure is implemented. However, other factors must be added to this equation – for example, what will be the price of gas or what percentage of the energy mix will be covered at the moment by the new generation of photovoltaic and wind installations, which are cheaper.

With this method, both countries want to change the system in which the last entering the megawatt-hour on the market fixes the prices of all others and separates the price of natural gas from the entire electricity system. The fourfold jump in prices since before the war in Ukraine has led to a record increase in Spanish electricity bills.

Does the European Commission approve?

The answer is ambiguous.

Last night, hours after Spanish media reports, a spokesman for the Madrid office in Brussels told Reuters that his country, along with Portugal, had been given the green light. As a result, a legal instrument on how the proposal will be implemented can be presented today.

At the same time, the correspondent of “El Diario” in Brussels explains that according to the explanations of the European Commission, “no formal decision” has been made, but “a temporary assessment”. El Pais interprets this as a precaution in anticipation of technical issues and details of the scheme.

The Commission explains that it remains in contact with the Iberian authorities about the details of the measure. The formal notice is forthcoming. The exceptional circumstances in which the restriction is introduced are understood.

As early as the end of March, the two governments announced that they had reached an understanding with the bloc countries on the deviation from the European Union standard and that they were doing so because of the Iberian network’s low connectivity with other bloc countries and growing penetration of renewable sources. At the end of April, positive signals were given by the European Commissioner for Competition Margrethe Westeger. The “interim evaluation” communication shared with the governments is considered by them to be approved.

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