Nord Stream investigating Baltic Sea pipeline leaks

Offshore staff

ZUG, Switzerland — Nord Stream AG says the pressure drop caused by the gas leak registered on both lines of the Nord Stream gas pipeline system in the Baltic Sea suggests the likelihood of physical damage to the system.

The company informed the relevant coast guards about the incident, adding that the positions of assumed damage are northeast from the Danish island of Bornholm in Swedish and Danish waters.

The Swedish and Danish maritime authorities established a 5-nautical-mile safety zone around the identified locations.

Nord Stream is mobilizing resources for a survey campaign to assess the damage in cooperation with relevant local authorities, but the company could not provide a timeframe for restoring the gas transport infrastructure.

Causes of the incident should become clear following the investigation, it added.

Denmarl’s Defense Minister Morten Bodskov has reportedly said it could take up to two weeks before the unexplained gas leaks can be inspected, owing to the pressure inside the pipes and the volumes of gas leaking.

Only then would the area “calm down enough to actually see what has happened."

Norway’s government has decided to heighten its emergency preparedness in relation to infrastructure, onshore and offshore installations on the Norwegian Continental Shelf (NCS) following reports of unidentified drones overflying certain fields.

Terje Aasland, Minister of Petroleum and Energy, said there had been close contact between the government, police, the Norwegian Armed Forces and the operators on the NCS.

“On this basis, the government has decided to enact measures to heighten emergency preparedness in relation to infrastructure, onshore and offshore installations… An investigation is ongoing. On a general basis, there is a high awareness around operational safety on the…shelf.”

Aasland added that information so far on the gas leaks from Nord Stream 1 and Nord Stream 2 both indicate acts of sabotage. Britain’s Daily Telegraph has speculated that the damage may have been caused by pre-programmed mines laid months ago, possibly even by a fishing vessel.

Market analysis

Rystad Energy’s regular gas and LNG market note from vice president Emily McClain stated:

Current energy crisis forces intensified this week with gas market concerns centering around the news of subsea damage that has caused leaks on both the Nord Stream 1 and Nord Stream 2 pipelines.

Gas prices appear like a leaf in the wind, with little indication on how far they will be carried and in what direction.

Early this week, European gas prices fell to almost $50 per MMBtu on the back of high storage levels at more than 87% full, but quickly rose on news of the damage to both Nord Stream pipelines.

We cannot expect prices to drop any time soon – at least not until we see some form of improvement in supply.

LNG carrier rates have been on the rise as buyers rush to secure LNG volumes early this year given the uncertainty in global gas supplies and the Northern Hemisphere winter outlook.

While the investigation into the cause of the pipeline damage is ongoing, a near-guaranteed supply cutoff will inevitably affect Europe’s gas supply this winter – but even more concerning is the impact on gas storage inventories ahead of next winter.

Supply cutoffs of this magnitude cannot be shaken off – even a short-term political swing in a pro-Russia direction would not be able to piece back together the severely dismantled gas system in Europe.

With news of the pipeline system damage, Nord Stream 1 nominations that had emerged last week – and that were then renominated to zero – were clearly an error and no flows were reported.

The possibility and timing of repairing both pipelines is unclear and depends on the severity and type of damage to the system.

The leakage could also have significant impacts from the environmental perspective and European energy infrastructure securities. Danish authorities have asked ships to steer clear of a five-nautical-mile radius off the island of Bornholm.

The Baltic Pipe is in the same vicinity, raising questions over whether this leakage will result in any delay to the planned startup of that pipeline, which is slated for early October.

09.28.2022