Nord Stream 2 gas pipe
Shortages of natural gas could cause rolling blackouts in Europe this winter, one of the world’s largest commodity traders has warned, as gas prices surged after Germany suspended certification of a key new pipeline from Russia.
Jeremy Weir, chief executive of Trafigura, said a prolonged cold snap could cause major problems in comments likely to spark alarm in Britain following months of soaring energy prices.
“We haven’t got enough gas at the moment quite frankly. We’re not storing for the winter period, so hence there is a real concern that … if we have a cold winter that we could have rolling blackouts in Europe,” he told the Financial Times Commodities Asia summit.
A global gas supply crunch has triggered a sustained gas price rally, forcing manufacturers to curb output and pushing 21 UK energy suppliers out of business since the start of September.
Gas plays a major role in electricity generation, meaning shortages have also pushed up power prices and risked causing blackouts, particularly when combined with low wind speeds denting output from wind turbines.
Russia has been accused of adding to the pressure by withholding extra supply to Europe to pressure Germany into giving the final approval for the Nord Stream 2 pipeline.
On Tuesday prices in Europe and Britain climbed 23pc to 238.9p per therm after Berlin suspended certification for the pipeline from Russia to Germany via the Baltic Sea.
German regulators took the decision after Nord Stream 2 set up a subsidiary to run the German section of the pipeline.
“The Bundesnetzagentur [regulator] concluded that it would only be possible to certify an operator of the Nord Stream 2 pipeline if that operator was organised in a legal form under German law,” they said.
“The subsidiary must then fulfil the requirements of an independent transmission operator as set out in the German Energy Industry Act.”
Nord Stream 2 told Bloomberg it was creating the subsidiary to “ensure compliance with applicable rules and regulations”, adding: “We are not in the position to comment on details of the procedure, its possible duration and impacts on the timing of the start of the pipeline operations.”
Owned by Russian state gas company Gazprom, Nord Stream 2 has been controversial as it allows Moscow to bypass Ukraine when sending gas to European markets and risks increasing Europe’s reliance on Russian supplies.
The US had opposed the project but in July struck a deal with Germany allowing the pipeline to go ahead, with Berlin pledging to respond to any attempt by Russia to use energy as a weapon against eastern European countries.
Europe gets about 40pc of its gas from Russia. Britain does not import much gas directly from Russia, but it does take some from Europe via pipelines, and prices in both markets track each other.
The controversial Nord Stream 2 pipeline risks increasing Europe’s reliance on Russian gas – Maxim Shemetov/REUTERS
Two more UK electricity suppliers collapsed on Tuesday, with several more thought to be at risk. Neon Reef and Social Energy Supply have about 30,000 and 5,500 customers respectively. Under the industry safety net, the regulator Ofgem will send each company's customers to a surviving supplier.
The price cap on energy bills prevents household suppliers from passing the costs onto customers immediately, but bills are predicted to rise by as much as £400 when the cap is next reset in April.
The cap does not apply to business customers, however. In September the Government was forced to step in with financial support for fertiliser plants in Cheshire and Teesside, after owner CF Industries closed the plants due to the high gas prices.
Trafigura’s Nyrstar zinc business in September cut production during peak times at its zinc smelter in the Netherlands due to soaring power prices caused by the high gas prices.
Mr Weir said the market had also been “challenging” for commodity traders but that the privately owned company was set for a “strong year”.