Gerhard Schroeder Becomes Head Of Russian-Led Gas Pipeline Project

Former German Chancellor Gerhard Schroeder (L), and Russian natural gas monopoly Gazprom CEO, Alexei Miller (R) shake hands during a news conference for the Russian natural gas monopoly Gazprom on March 30, 2006 at the headquarters in Moscow, Russia. Schroeder has denied cashing in on his connections as he started a lucrative job on Thursday as head of a Russian-led gas pipeline project.

This detailed, scenario-based analysis considers potential European natural gas supply outcomes this winter. Relations between Moscow and the West have deteriorated to arguably the lowest levels since the Cold War over Russia’s continued aggression in Ukraine. Increasingly strict economic sanctions have been initiated by western governments and intergovernmental organizations against strategic sectors of Russia’s economy and individual companies, including some energy-focused firms. But EU-led sanctions have stopped short of targeting state-controlled Gazprom because strong mutual dependence would render such punishment counterproductive.

The piece argues Gazprom learned painful lessons from using the gas weapon in 2009, and in an effort to avoid alienating the West, has been supplying substantial volumes of gas to trading partners in Italy and Germany, allowing them to top up inventories heading into winter.

The message seems to be: “Whatever difficulties arise this winter, Gazprom is helping you prepare.” – Energy Intelligence

The above is part of a “De-escalation” scenario and the analysis goes on to consider the potential for “Stalemate” and “Escalation.”

In the worst case scenario, “Without Russia, winter spot prices of $15-$22 could become the norm, with NBP prices on cold peak-demand days surging much higher than the 2013 high, sending price signals well beyond Europe.” With Russian valves shut, LNG import terminals currently experiencing slack demand would begin running at or near capacity and negotiations with pipeline suppliers like Algeria’s Sonatrach would start up, as companies and governments struggled to any available gas supply.

This is certainly a situation worth watching over the coming weeks as summer draws to a close.