Russian Gas Purchases Halted, But Exit From Nord Stream Not Discussed, German Energy Giant E.ON Says

Ukrainian energy company Naftogaz recently called on Europe to slap sanctions on Nord Stream 1, the set of offshore natural gas pipelines running from Russia to Germany under the Baltic Sea. The pipeline network is capable of delivering up to 55 billion cubic meters of gas per year to Europe.

German energy giant E.ON will halt the purchase of natural gas from Russian companies, but has no plans to withdraw from Nord Stream 1, company CEO Leonhard Birnbaum has said.

"We buy our gas in wholesale markets in Europe. E.ON does not have long-term supply contracts directly with producers. However, a small amount of natural gas in our portfolio was purchased from Gazprom's trading companies in Europe. Due to the conflict in Ukraine, we stopped purchasing new volumes of gas from these companies. The Russian market is not among our target regions," Birnbaum said in a statement Wednesday.

"We are not considering withdrawing from Nord Stream 1. This is an asset which cannot be sold. We could give it up to the main Russian shareholder [Gazprom - ed.] for free, but this would not be profitable. If we abandon our management rights, we would give the majority shareholder from Russia the right to make decisions independently," Birnbaum added.

The CEO indicated that a prolonged shortage of energy imports will cause problems for the company in the long-term. "The current situation certainly does not make our business easier," he said. He added that Germany can build a new LNG terminal before the end of 2023, with independence from Russian gas possible in 2-3 years.

Russia delivered over 50 billion cubic meters of gas to Germany in 2021. The central European industrial power imported some 142 billion bcm the same year.

Nord Stream 1 became fully operational in 2012, and was built after numerous conflicts over pricing and threats to cut off supplies between Gazprom and countries containing Soviet-built gas transit infrastructure in Eastern Europe. The pipeline network is operated by Nord Stream AG, 51 percent of which is owned by a Gazprom subsidiary, and 15.5 percent apiece by Germany's Wintershall and E.ON. Another 9 percent each is owned by NV Nederlandse Gasunie and France's Engie.

Nord Stream 2, a Russian-European gas pipeline project complementing Nord Stream 1, was completed and made ready for operation late last year, with German regulators deliberately drawing out its certification process. The project's certification was suspended on 22 February by Berlin in response to Russia's recognition of the Donetsk and Lugansk People's Republics as independent nations. That pipeline network's Switzerland-based operator filed for bankruptcy on 1 March.

The crisis in Ukraine and uncertainty over the supply of Russian oil and gas to Europe and other markets has caused an unprecedented spike in energy prices. Gazprom and other Russian companies have promised to continue providing supplies to clients according to previously agreed contracts, with gas continuing to flow through Ukraine's gas transit infrastructure to European customers notwithstanding the Russian military operation in the country.