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Abu Dhabi, UAESaturday 22 September 2018

Austrian gas plant back online in a day but consumers face higher energy prices

Supplies to Germany, Hungary and Italy were restored before midnight on Tuesday, less than 16 hours after the blast that killed one

A shield reading "Attention — Danger of explosion" is pictured on a fence at the site of Austria's main gas pipeline hub at Baumgarten an der March, Eastern Vienna, after an explosion rocked the site on December 12, 2017. Joe Klamar / AFP
A shield reading "Attention — Danger of explosion" is pictured on a fence at the site of Austria's main gas pipeline hub at Baumgarten an der March, Eastern Vienna, after an explosion rocked the site on December 12, 2017. Joe Klamar / AFP

European gas consumers faced weeks of higher prices even though supplies resumed through the Baumgarten hub resumed on Wednesday less than a day after a fatal explosion.

OMV, the energy giant who controls the key facility in the continent’s natural gas network, said that supplies to Germany, Hungary and Italy were restored before midnight on Tuesday. Italy remains in a state of emergency called by the country’s economic ministry.

“We were able to resume operation for all transit lines before midnight yesterday and all those lines are 100 percent operational,” a spokesman for Gas Connect Austria (GCA), the hub’s operator, told Austrian radio.

The cause of the explosion is believed to have been a technical fault in the filter system, according to GCA. Work had been carried out on the system on Monday and staff from TUV Austria, a licensing authority, were on site on Tuesday morning to certify the system was safe.

It was also confirmed that it was a TUV employee who died in the blast at the facility, which transports a tenth of Europe’s gas demand.

Despite the rapid restoration of gas flows through Baumgarten, the repercussions of the incident continue to be felt across the continent, both economically and politically.

Britain has been forced to turn to Russia for supplies of liquefied natural gas, as a tanker from Yamal LNG project in Russia’s Arctic territory is being sent to the Isle of Grain import terminal in Kent as UK gas prices soar. The cargo was initially earmarked to be sent to Asia, but the Kremlin will not have missed the opportunity to show that one of the states which has targeted Russia for other perceived slights has had to come cap in hand to keep the home fires burning.

As the largest supplier of natural gas to Europe, with a third of the country’s output flowing through Baumgarten, Russia has used the accident to highlight why its plan for a new pipeline known as Nord Stream 2 to be built across the Baltic Sea is urgently required.

“Of course this accident shows how important sustainable supplies of natural gas and energy resources [are] to Europe and how acute is the issue of sustainability of the whole [energy] system functioning,” Kremlin spokesman Dmitry Peskov said.

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Read more:

Explosion at major Austrian gas hub leaves one dead

Gas plant blast plunges Europe into energy chaos

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Gazprom, the Russian energy group, redirected its gas flows through Europe on Tuesday. It wants to build a $10 billion pipeline that will allow it to send gas to Germany from the north, bypassing existing land routes over Ukraine, Poland and Belarus.

Nord Stream 2 will double the natural gas export capacity of Russia.

Despite German support for it, the EU sees the plan as undermining efforts to reduce the union’s dependence on energy from Russia. This position was endorsed on Tuesday by A Wess Mitchell, assistant secretary of state for European and Eurasian affairs at the State Department.

Mr Mitchell told the Senate Foreign Relations Committee that “on energy security, Germany gets it wrong,” referring to the country’s support for Nord Stream 2. “And it gets it wrong in a way that hurts other EU member states.”

He went out of his way to support Denmark, who had passed a law which would allow the country to block pipelines that entered its territorial waters on foreign policy or security grounds. Implications of the accident are also being felt in other countries. Italy will soon be linked via the Trans Adriatic Pipeline to the gas fields of Azerbaijan, a project which is 50% completed and expected to come on line in the next few years.

The United Kingdom has seen Tuesday’s sharp hike in gas prices continuing; the country’s situation is compounded by an exceptionally cold start to winter and problems with a key pipeline network linking the country to the Forties oil field, the largest in the North Sea.

The Forties carries four-tenths of the crude oil extracted from the North Sea, and its closure for up to three weeks to mend a hairline crack in the pipeline will see 80 oil platforms sitting idle.

Massimo Di-Odoardo, an analyst at energy consultancy Wood Mackenzie, said: “The European gas market seems to be going through a perfect storm. The Forties outage will take out more than more than 10% of UK gas demand. The explosion at Baumgarten … halted Russian imports to Italy, representing more than 30% of Italian gas demand.

“There is still plenty of storage across Europe to cope with this. But if supply does not resume soon and the cold weather continues, prices will remain strong through the winter. We might well see some competition between Europe and Asia to attract LNG this winter.”

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