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World

India hikes spending, shuns ‘outright populism’ in last pre-election budget

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  • Capex to rise 33% to 10 trillion rupees in 2023/24
  • Govt targets gross borrowing of 15.43 trillion rupees
  • Eyes fiscal deficit of 5.9% in 2023/24, 4.5% by 2025/26

NEW DELHI, Feb 1 (Reuters) – India announced on Wednesday one of its biggest ever increases in capital spending for the next fiscal year to create jobs but targeted a narrower fiscal deficit in its last full budget ahead of a parliamentary election due in 2024.

Prime Minister Narendra Modi’s party has been under pressure to create jobs in the populous country where many have struggled to find employment, although the economy is now one of the world’s fastest-growing.

“After a subdued period of the pandemic, private investments are growing again,” Finance Minister Nirmala Sitharaman said as she presented the 2023/24 budget in parliament.

“The budget makes the need once again to ramp up the virtuous cycle of investment and job creation. Capital investment is being increased steeply for the third year in a row by 33% to 10 trillion rupees.”

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The capital spending increase to about $122.3 billion, which would amount to 3.3% of gross domestic product (GDP), will be the biggest such jump after an increase of more than 37% between 2020/21 and 2021/22.

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Total spending will rise 7.5% to 45.03 trillion rupees ($549.51 billion) in the next fiscal year starting on April 1.

Sitharaman said the government would target a fiscal deficit of 5.9% of GDP for 2023/24 compared with 6.4% for the current fiscal year and slightly lower than a Reuters poll of 6%. The aim is to lower the deficit to 4.5% by 2025/26.

Reuters Graphics

STEADY ‘MACRO BOAT’

Brokerage Nomura said the budget “prudently pushes for growth, without rocking the macro boat”.

“In the event, the government has presented a good budget. It has pushed for growth via public capex and continued on the path towards fiscal consolidation, without offering much in terms of outright populism.”

Capital Economics said the “absence of a fiscal blowout”, a recent drop in inflation and signs of moderating growth could convince India’s central bank to slow the pace of rate hikes next week.

It said there was still a chance of fiscal slippage as campaigning kicks off for the election, in which Modi is widely projected to win a third straight term.

The finance ministry’s annual Economic Survey, released on Tuesday, forecast the economy could grow 6% to 6.8% next fiscal year, down from 7% projected for the current year, while warning about the impact of cooling global demand on exports.

Sitharaman said India’s economy was “on the right track, and despite a time of challenges, heading towards a bright future”.

India’s real GDP is forecast to grow in the range of 6-6.8% in FY24

Her deficit plan will be aided by a 28% cut in subsidies on food, fertiliser and petroleum for the next fiscal year at 3.75 trillion rupees. The government cut spending on a key rural jobs guarantee programme to 600 billion rupees – the smallest in more than five years – from 894 billion rupees for this fiscal year.

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The government’s gross market borrowing is estimated to rise about 9% to 15.43 trillion rupees next fiscal year.

Reuters Graphics Reuters Graphics

CONSTRAINTS

Moody’s Investors Service said the narrower fiscal deficit projection pointed to the government’s commitment to longer-term fiscal sustainability, but that a “high debt burden and weak debt affordability remain key constraints that offset India’s fundamental strengths”.

Among other moves to stimulate consumption, the surcharge on annual income above 50 million rupees was cut to 25% from 37%.

Indian shares reversed earlier gains to close lower on Wednesday, led by a fall in insurance companies after the budget proposed to limit tax exemptions for insurance proceeds, while Adani Group shares tumbled again as it struggles to repel concerns raised by a U.S. short seller.

Since taking office in 2014, Modi has ramped up capital spending including on roads and energy, while wooing investors through lower tax rates and labour reforms, and offering subsidies to poor households to clinch their political support.

A lack of jobs for young people, and meagre wages for those who do find work, has been one of the main criticisms of Modi.

Sitharaman also said the government was allocating 350 billion rupees for energy transition, as Modi focuses on green hydrogen and other cleaner fuels to meet India’s climate goals.

($1 = 81.7725 Indian rupees)

Reporting by Shubham Batra, Nikunj Ohri, Shivangi Acharya, Sarita Singh, Nigam Prusty, Manoj Kumar, Rupam Jain and Indian bureaux; Writing by Krishna N. Das; Editing by Kim Coghill, Jacqueline Wong and Gareth Jones

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World

Pakistan begins restoring power after second major grid breakdown in months

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ISLAMABAD, Jan 23 (Reuters) – Pakistan’s government began restoring power to millions of people on Monday after a breakdown in the grid triggered the worst electricity outage in months and highlighted the weak infrastructure of the heavily indebted nation.

An inquiry has been launched into the outage, which began at around 7:00 a.m. local time (0200 GMT) and has so far lasted more than 12 hours during the peak winter season.

As evening drew on and homes were without electricity in the dark, Energy Minister Khurram Dastgir wrote on Twitter that authorities had started restoring power across the country.

Dastgir had told reporters earlier: “We have faced some hurdles but we will overcome these hurdles, and will restore the power.”

The outage, which the minister had said was due to a voltage surge, is the second major grid failure in three months, and adds to the blackouts that Pakistan’s nearly 220 million people suffer on an almost-daily basis.

Power was beginning to return in parts of the capital Islamabad and the southwest province of Balochistan, said Dastgir.

Pakistan’s largest city and economic hub Karachi is likely to see electricity restored in the next three to four hours, a spokesperson for K-Electric Ltd (KELE.PSX), the southern city’s power provider, said.

[1/5] A man sits outside his shop during a country-wide power breakdown in Karachi, Pakistan January 23, 2023. REUTERS/Akhtar Soomro

Analysts and officials blame the power problems on an ageing electricity network, which like much of the national infrastructure, desperately needs an upgrade that the government says it can ill afford.

The International Monetary Fund has bailed out Pakistan five times in the last two decades. Its latest bailout tranche, however, is stuck due to differences with the government over a programme review that should have been completed in November.

Pakistan has enough installed power capacity to meet demand, but it lacks resources to run its oil-and-gas powered plants. The sector is so heavily in debt that it cannot afford to invest in infrastructure and power lines. China has invested in its power sector as part of a $60 billion infrastructure scheme that feeds into Beijing’s “Belt and Road” initiative.

“We have been adding capacity, but we have been doing so without improving transmission infrastructure,” said Fahad Rauf, head of research at Karachi brokerage Ismail Iqbal Industries.

The outage occurred on a winter’s day where temperatures are forecast to fall to around 4 degrees Celsius (39°F) in Islamabad and 8 degrees Celsius (46°F) in Karachi.

Many people also have no running water due to a lack of power for the pumps.

Earlier, Dastgir told Reuters the grid should be fully functioning by 10:00 p.m. (1700 GMT).

The outage hit Internet and mobile phone services. Several companies and hospitals said they had switched to back-up generators, but disruptions continued across the board.

Reporting by Asif Shahazad, Ariba Shahid and Gibran Naiyyar Peshimam, additional reporting by Jibran Ahmad in Peshawar and Mubasher Bukhari in Lahore and Charlotte Greenfield in Kabul; writing by Shilpa Jamkhandikar, Miral Fahmy and Shivam Patel; editing by Sudipto Ganguly, Simon Cameron-Moore and Bernadette Baum

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World

UK’s National Grid to pay people to use less power amid cold snap

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LONDON, Jan 23 (Reuters) – Britain’s National Grid (NG.L) said it would pay customers to use less power on Monday evening and that it had asked for three coal-powered generators to be warmed up in case they are needed as the country faces a snap of cold weather.

The group said that it would activate a new scheme called the Demand Flexibility Service where customers get incentives if they agree to use less power during crunch periods.

The service, which has been trialled but not run in a live situation before, would run from 5 p.m. to 6 p.m. on Monday, it said, adding that the move did not mean electricity supplies were at risk and advised people not to worry.

The measures were announced in order to “ensure that everyone gets the electricity they need,” Craig Dyke, Head of National Control at National Grid ESO, told BBC Radio on Monday, adding that 26 suppliers had signed up for the scheme.

[1/2] A British government advert offering people help with winter energy bills is seen on the side of a bus in Stockport, Britain, November 16, 2022. REUTERS/Phil Noble

Below freezing temperatures have been recorded across much of the UK in recent days with the national weather service, the Met Office, last week issuing severe weather warnings for snow and ice.

National Grid’s Dyke said consumers could make small changes to make money by reducing their energy usage, such as delaying cooking or putting on the washing machine until after 6 p.m.

National Grid said in December that over a million British households had signed up to the scheme, which is one of its strategies to help prevent power cuts.

The announcement about the coal-powered generators did not mean they would definitely be used, it said in a separate statement.

Coal-powered generators were last put on stand-by in December when temperatures dropped and demand for energy rose, but they were not needed on that occasion.

Reporting by William Schomberg and Muvija M in London, and Sneha Bhowmik in Bengaluru; editing by Tomasz Janowski, Andrew Heavens, Kirsten Donovan

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US

Kansas residents hold their noses as crews mop up massive U.S. oil spill

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WASHINGTON, Kan., Dec 10 (Reuters) – Residents near the site of the worst U.S. oil pipeline leak in a decade took the commotion and smell in stride as cleanup crews labored in near-freezing temperatures, and investigators searched for clues to what caused the spill.

A heavy odor of oil hung in the air as tractor trailers ferried generators, lighting and ground mats to a muddy site on the outskirts of this farming community, where a breach in the Keystone pipeline discovered on Wednesday spewed 14,000 barrels of oil.

Pipeline operator TC Energy (TRP.TO) said on Friday it was evaluating plans to restart the line, which carries 622,000 barrels per day of Canadian oil to U.S. refineries and export hubs.

“We could smell it first thing in the morning; it was bad,” said Washington resident Dana Cecrle, 56. He shrugged off the disruption: “Stuff breaks. Pipelines break, oil trains derail.”

TC Energy did not provide details of the breach or say when a restart on the broken segment could begin. Officials are scheduled on Monday to receive a briefing on the pipeline breach and cleanup, said Washington County’s emergency preparedness coordinator, Randy Hubbard, on Saturday.

OIL FLOWS TO CREEK

Environmental specialists from as far away as Mississippi were helping with the cleanup and federal investigators combed the site to determine what caused the 36-inch (91-cm) pipeline to break.

Washington County, a rural area of about 5,500 people, is about 200 miles (322 km) northwest of Kansas City.

The spill has not threatened the water supply or forced residents to evacuate. Emergency workers installed booms to contain oil that flowed into a creek and that sprayed onto a hillside near a livestock pasture, said Hubbard.

TC Energy aims to restart on Saturday a pipeline segment that sends oil to Illinois, and another portion that brings oil to the major trading hub of Cushing, Oklahoma, on Dec. 20, Bloomberg News reported, citing sources. Reuters has not verified those details.

It was the third spill of several thousand barrels of crude on the 2,687-mile (4,324-km) pipeline since it opened in 2010. A previous Keystone spill had caused the pipeline to remain shut for about two weeks.

“Hell, that’s life,” said 70-year-old Carol Hollingsworth of nearby Hollenberg, Kansas, about the latest spill. “We got to have the oil.”

TC Energy had around 100 workers leading the cleanup and containment efforts, and the U.S. Environmental Protection Agency was providing oversight and monitoring, said Kellen Ashford, an EPA spokesperson.

U.S. regulator Pipeline and Hazardous Materials Administration (PHMSA) said the company shut the pipeline seven minutes after receiving a leak detection alarm.

CRUDE BOTTLENECK

A lengthy shutdown of the pipeline could lead to Canadian crude getting bottlenecked in Alberta, and drive prices at the Hardisty storage hub lower, although price reaction on Friday was muted.

Western Canada Select (WCS), the benchmark Canadian heavy grade, for December delivery last traded at a discount of $27.70 per barrel to the U.S. crude futures benchmark , according to a Calgary-based broker. On Thursday, December WCS traded as low as $33.50 under U.S. crude, before settling at around a $28.45 discount.

“The real impact could come if Keystone faces any (flow) pressure restrictions from PHMSA, even after the pipeline is allowed to resume operations,” said Ryan Saxton, head of oil data at consultants Wood Mackenzie.

Reporting by Erwin Seba in Washington, Kansas, and Nia Williams in Calgary, Alberta;
Additional reporting by Arathy Somasekhar in Houston, Rod Nickel in Winnipeg and Stephanie Kelly in New York
Editing by Gary McWilliams, Stephen Coates and Matthew Lewis

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World

Druzhba pipeline leak reduces Russian oil flows to Germany

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WARSAW, Oct 12 (Reuters) – Germany said on Wednesday it was receiving less oil but still had adequate supplies, after Poland found a leak in the Druzhba pipeline that delivers crude from Russia to Europe that Warsaw said was probably caused by an accident rather than sabotage.

The discovery of the leak in the main route carrying oil to Germany, which operator PERN said it found on Tuesday evening, comes as Europe is on high alert over its energy security as it faces a severe crisis in the aftermath of Moscow’s invasion of Ukraine which has cut supplies of gas.

“Security of supply in Germany is currently guaranteed,” an economy ministry spokesperson said in an emailed statement. “The refineries in Schwedt and Leuna continue to receive crude oil via the Druzhba pipeline.”

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The Schwedt refinery, which supplies 90% of Berlin’s fuel, said in an emailed statement that deliveries were taking place at reduced capacity.

Germany said it was hoping for more information soon from Poland about the cause of the leak and how it can be repaired.

Europe has been on high alert over the security of its energy infrastructure since major leaks were found last month in the Nord Stream 1 and 2 gas pipelines running from Russia to Europe under the Baltic Sea. Both the West and Russia have blamed sabotage.

However, Poland’s top official in charge of energy infrastructure, Mateusz Berger, told Reuters by telephone that the leak in the Druzhba pipeline was most likely caused by “accidental damage”.

“We are living in turbulent times, different connotations are possible, but at this stage we have no grounds at all to believe that,” he said, when asked about the possibility of sabotage.

Berger said the leak was located 70 km (44 miles) west from Plock, where Poland’s biggest refinery owned by PKN Orlen is located. As a result, part of the shipping capacity towards Germany was not available, he said, adding that repairs would likely “not take long”.

PERN said supplies to Germany were reduced but continuing.

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GERMAN, POLAND REFINERY SUPPLIES

A model of a pipe line is seen at the main entrance to the Gomel Transneft oil pumping station, which moves crude through the Northern Druzhba pipeline westwards to Poland and Europe, near Mozyr, Belarus, in this file picture taken January 4, 2020. REUTERS/Vasily Fedosenko

The Druzhba oil pipeline, whose name means “friendship” in Russian, is one of the world’s largest, supplying Russian oil to much of central Europe including Germany, Poland, Belarus, Hungary, Slovakia, the Czech Republic and Austria.

Russia’s Transneft state-owned pipeline monopoly said that oil continues to be pumped towards Poland.

Poland’s PKN Orlen (PKN.WA) said that oil supplies to its Plock refinery were not interrupted while Czech pipeline operator MERO said it had not seen any change in flows to the Czech Republic.

“The main action (we are taking) is to pump out the liquid and locate the leak and stop it,” fire brigade spokesman Karol Kierzkowski told state broadcaster TVP Info.

“When the pressure decreases, the leak will stop and allow us to reach the leak,” he said, adding that it was too early to establish the cause and there was no danger to the public.

Firefighters in the mid-northern Kujawsko-Pomorskie region of Poland said they had pumped about 400 cubic metres of oil and water from the site of the leak which was in the middle of a corn field.

The second line of the pipeline, and other elements of PERN’s infrastructure, were working as normal, PERN said.

“At this point, all PERN services (technical, operational, in-house fire brigade and environmental protection) are taking action in accordance with the algorithms provided for this type of situation,” the operator said.

The total capacity of the western section of the pipeline that ships oil from central Poland to Germany is 27 million tonnes of crude oil per year.

Germany’s Schwedt refinery is particularly dependent on Druzhba.

The German government aims to eliminate imports of oil from Russia by the end of the year under European Union sanctions. But in the first seven months of the year, Russia was still its top supplier, accounting for just over 30% of oil imports.

As Germany looks for alternative supplies for Schwedt, Druzhba could be instrumental in supplying oil via the Polish port in Gdansk.

The German government has also been in talks to secure oil from Kazakhstan to supply Schwedt, but that oil would have to flow to Germany via the Druzhba pipeline too.

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Reporting by Reuters bureaus writing by Alan Charlish and Marek Strzelecki; Editing by Jan Harvey and Elaine Hardcastle

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Business

Toyota restarts output of first EV after fixing safety issues

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TOKYO, Oct 6 (Reuters) – Toyota Motor Corp said it would restart production of its first electric vehicle, the bZ4X, on Thursday after fixing potential safety problems that had halted sales of the new battery-powered model for more than three months.

Japan’s largest automaker, a laggard in the EV market, recalled 2,700 bZ4Xs globally in June after discovering that there was a risk the car’s wheels could come loose.

Subaru Corp (7270.T), a fifth owned by Toyota, also had to recall units of the related Solterra model that it jointly developed with Toyota.

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A recall notice submitted to Japan’s transport ministry by Toyota in June said that sharp turns and sudden braking could cause a hub bolt to loosen, raising the risk of a wheel coming off the vehicle.

The automaker on Thursday said in a filing to the ministry that it would make sure hub bolts were replaced and properly tightened in new versions of the bZ4X.

In addition, Toyota said it had identified and fixed a potential problem with airbags in the car. Some airbags had been improperly installed at the factory and were at risk to fail or cause injury because of the placement of a strap inside the airbag assembly.

Toyota had not previously disclosed that problem.

2023 Toyota bZ4X all-electric SUV is displayed during the 2021 LA Auto Show in Los Angeles, California, U.S. November, 17, 2021. REUTERS/Mike Blake

Masahiko Maeda, Toyota’s chief technology officer, told a briefing the automaker only became aware of the airbag issue in the last month or two.

“We apologise again for the concern, anxiety, and inconvenience we have caused to our customers, our dealers and our stakeholders,” Maeda said.

He declined to comment on how much the recall had cost.

Toyota has faced criticism from environmental groups and investors who want the company to expand faster into battery EVs. Toyota has pushed back, saying it needs to offer car choices to suit different markets and customers.

Hybrids such as the Prius remain far more popular in Toyota’s home market. Pure battery-electric vehicles accounted for just 1% of the passenger cars sold in Japan last year, according to industry data.

The bZ4X is available for lease only in Japan – a service which will resume on Oct. 26, Maeda said. He did not specify when U.S. sales would recommence.

Only 232 units of crossover, pitched as Toyota’s answer to Tesla’s (TSLA.O) Model Y and the Volkswagen’s (VOWG_p.DE) ID.4, have been sold this year in the United States.

Last year, the Japanese automaker committed about $30 billion to develop battery electric vehicles. It expects the company’s annual sales of such cars to reach only 3.5 million vehicles by the end of the decade, about one-third of current annual sales of its gasoline-powered cars.

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Reporting by Satoshi Sugiyama and Maki Shiraki; Editing by Kevin Krolicki and Edwina Gibbs

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Business

S&P cuts UK rating outlook after tax cut plan

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LONDON, Sept 30 (Reuters) – Ratings agency Standard & Poor’s cut the outlook for its AA credit rating for British sovereign debt on Friday to “negative” from “stable” as it judged Prime Minister Liz Truss’s tax cut plans would cause debt to keep rising.

Finance minister Kwasi Kwarteng announced around 45 billion pounds ($50 billion) of permanent, unfunded tax cuts on Sept. 23 as well as costly temporary subsidies to household and business energy bills, sending sterling and bond markets into a tailspin.

While sterling has since recovered, the Bank of England was forced to launch an emergency bond purchase programme on Wednesday to stabilise markets and has warned it would probably need to raise interest rates significantly in November.

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S&P – which ranks British government debt one notch higher than rivals Moody’s and Fitch – said it saw British public debt on an upward trajectory, in contrast to a previous forecast that it would fall as a share of gross domestic product from 2023.

“Our updated fiscal forecast is subject to additional risks, for instance, if the UK’s economic growth turns out weaker due to further deterioration of the economic environment, or if the government’s borrowing costs increase more than expected, driven by market forces and monetary policy tightening,” it added.

S&P forecast Britain would enter a technical recession in the coming quarters and its GDP would shrink by 0.5% in 2023.

Truss and Kwarteng met top officials from Britain’s Office for Budget Responsibility on Friday, but have so far rejected calls from some investors and political rivals that they ask the independent OBR to publish new forecasts sooner than Nov. 23, when Kwarteng intends to set out a debt-reduction plan.

Moody’s said on Wednesday that Kwarteng’s tax cuts were “credit negative”, and has flagged Oct. 21 as the most likely next date for a more formal review.

Britain’s government has said that tax cuts and longer-term structural reforms to areas such as immigration and planning permits should boost growth, but S&P said the benefit was likely to be modest, especially in the short term.

“For now it is unclear whether the government plans to ultimately introduce fiscal consolidation measures to bring debt back on a downward path and we assume that the package will be funded by debt,” it said.

Britain’s public borrowing was likely to average 5.5% of GDP a year from 2023 to 2025, compared with a previous forecast of 3%, while general government debt would rise to 97% of GDP by 2025, S&P forecast.

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Reporting by David Milliken; Editing by Leslie Adler, Daniel Wallis and David Gregorio

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Business

EU countries approve energy windfall levies, turn to gas price cap

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  • EU approves energy windfall profit levies
  • Countries eye gas price caps as their next move
  • States split over how to contain sky-high prices

BRUSSELS, Sept 30 (Reuters) – European Union countries agreed on Friday to impose emergency levies on energy firms’ windfall profits, and began talks on their next move to tackle Europe’s energy crunch – possibly a bloc-wide gas price cap.

Ministers from the 27 EU member countries met in Brussels on Friday, where they approved measures proposed earlier this month to contain an energy price surge that is stoking record-high inflation and threatening a recession.

The package includes a levy on fossil fuel companies’ surplus profits made this year or next, another levy on excess revenues low-cost power producers make from soaring electricity costs, and a mandatory 5% cut in electricity use during peak price periods.

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With the deal done, countries began talks on Friday morning on the EU’s next move to contain the price crunch, which many countries want to be a broad gas price cap, though others – most notably Germany – remain opposed.

“All these temporary measures are very well, but in order to find the solution to help our citizens in this energy crisis, we need to cap the gas price,” Croatian economy minister Davor Filipovic said on his arrival at Friday’s meeting.

Fifteen countries, including France, Italy and Poland, this week asked Brussels to propose a price cap on all wholesale gas transactions to contain inflation.

The cap should be set at a level that is “high and flexible enough to allow Europe to attract the required resources”, Belgium, Greece, Poland and Italy said in a note explaining their proposal seen by Reuters on Thursday.

The countries disputed the Commission’s claim that a broad gas price cap would require “significant financial resources” to finance emergency gas purchases should market prices break the EU’s cap.

Belgian energy minister Tinne Van der Straeten said only 2 billion euros ($1.96 billion) would be required, as most European imports fall under long-term contracts or arrive by pipeline with no easy alternative buyers.

That would be a fraction of the 140 billion euros the EU expects its windfall profit levies on energy firms to raise.

Czech Republic’s Deputy Prime Minister Jozef Sikela and European Commissioner for Energy Kadri Simson hold a news conference after a European Union Energy Ministers meeting on high energy prices, in Brussels, Belgium September 30, 2022. REUTERS/Yves Herman

But Germany, Austria, the Netherlands and others warn broad gas price caps could leave countries struggling to buy gas if they cannot compete with buyers in price-competitive global markets.

A diplomat from one EU country said the idea posed “risks to security of supply” as Europe heads into a winter with tight energy supplies after Russia slashed gas flows to Europe in retaliation for Western sanctions against Moscow for invading Ukraine.

The European Commission has also raised doubts and suggested the EU instead move ahead with narrower price caps, targeting Russian gas alone, or specifically gas used for power generation.

“We have to offer a price cap for all Russian gas,” EU energy policy chief Kadri Simson said.

Brussels suggested that idea earlier this month, but it hit resistance from central and eastern European countries worried Moscow would retaliate by cutting off the remaining gas it still sends to them.

By introducing EU-wide measures Brussels hopes to overlay governments’ uneven national approaches to the energy crunch, which have seen richer EU countries far outspend poorer ones in handing out cash to ailing companies and consumers struggling with bills.

Germany, Europe’s biggest economy, set out a 200 billion euro package on Thursday to tackle soaring energy costs, including a gas price brake.

Luxembourg energy minister Claude Turmes urged Brussels to change EU state aid rules to stop the “insane” spending race between countries.

“That’s the next frontier, to get more solidarity and to stop this infighting,” Turmes said.

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Reporting by Kate Abnett and Gabriela Baczynska; Additional reporting by Philip Blenkinsop, Bart Meijer and John Chalmers; Editing by Jan Harvey

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World

Gas from Russia’s Nord Stream 2 pipeline leaks into Baltic Sea

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BERLIN, Sept 26 (Reuters) – The Danish authorities on Monday asked ships to steer clear of a five nautical mile radius off the island of Bornholm after a gas leak overnight from the defunct Russian-owned Nord Stream 2 pipeline drained into the Baltic Sea.

The German government said it was in contact with the Danish authorities and working with local law enforcement to find out what caused pressure in the pipeline to plummet suddenly. Denmark’s energy ministry declined to comment.

The pipeline has been one of the flashpoints in an escalating energy war between Europe and Moscow since Russia’s invasion of Ukraine in February that has pummelled major Western economies and sent gas prices soaring.

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“A leak today occurred on the Nord Stream 2 pipeline in the Danish area,” said Denmark’s energy agency in a statement.

Danish maritime authorities had issued a navigation warning and established a zone around the pipeline “as it is dangerous for ship traffic”, it added.

Nord Stream 2’s operator said pressure in the pipeline, which had contained some gas sealed inside despite never becoming operational, dropped from 105 to 7 bars overnight.

The pipeline, which was intended to double the volume of gas flowing from St. Petersburg under the Baltic Sea to Germany, had just been completed and filled with 300 million cubic metres of gas when Germany cancelled it days before the invasion.

“Overnight the Nord Stream 2 landfall dispatcher registered a rapid gas pressure drop on Line A of the Nord Stream 2 natural gas pipeline,” Nord Stream 2’s operator said in a statement.

“Investigation is ongoing.”

NO CLARITY

European countries have resisted Russian calls to allow the Nord Stream 2 pipeline to operate and accused Moscow of using energy as a weapon. Russia denies doing so and blames the West for gas shortages.

“We are currently in contact with the authorities concerned in order to clarify the situation. We still have no clarity about the causes and the exact facts,” said a statement from the German economy ministry.

The Swiss-based operator, which has legally been wound up, said it had informed all relevant authorities about the leak.

Russian gas exporter Gazprom (GAZP.MM) referred questions about the incident to the Nord Stream 2 operator.

Russia has cut off gas supplies to several countries and also halted flows through the Nord Stream 1 pipeline, blaming Western sanctions for hindering operations.

President Vladimir Putin in September chided the West for keeping Nord Stream 2 shut. read more

Monday’s gas leak happened a day before the ceremonial launch of the Baltic Pipe carrying gas from Norway to Poland.

The project is a centrepiece of Warsaw’s efforts to diversify from Russian gas. Danish Prime Minister Mette Frederiksen is due to travel to Poland on Tuesday to mark the occasion.

Nord Stream 2 was widely unpopular among Danish lawmakers and the country in 2017 passed a law which allowed it to ban the project from passing through its territorial waters on security grounds.

But Nord Stream 2 later changed the original route to steer it through Denmark’s exclusive economic zone, where this veto could not be applied.

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Reporting by Thomas Escritt, Christian Kraemer, Stine Jacobsen, Terje Solsvik, Marek Strzelecki and Matthias Williams; Writing by Matthias Williams; Editing by Andrea Ricci and Mark Potter

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Thomas Escritt

Thomson Reuters

Berlin correspondent who has investigated anti-vaxxers and COVID treatment practices, reported on refugee camps and covered warlords’ trials in The Hague. Earlier, he covered Eastern Europe for the Financial Times. He speaks Hungarian, German, French and Dutch.

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Business

Europe races to prepare for energy crunch this winter

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  • Spain may shut energy-intensive industries at peak times
  • France prepares to send gas to Germany in October
  • Germany to sign LNG contracts in UAE
  • Berlin still working on Uniper bailout

BERLIN/LISBON, Sept 19 (Reuters) – Germany was pressing on Monday to secure liquefied natural gas contracts with Gulf producers and other European states outlined measures to conserve energy, with Russian flows running at severely reduced levels as winter approaches.

Berlin said it aimed to sign LNG contracts in the United Arab Emirates to supply terminals it is building, now that the vital Nord Stream 1 gas pipeline from Russia is shut, while Spain, France others outlined contingency planning to try to avoid power cuts. read more

“If everything goes well, savings in Germany are high and we have a bit of luck with the weather, we … have a chance at getting through the winter comfortably,” Economy Minister Robert Habeck said after a tour of a future LNG terminal in northern Germany. read more

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The sharp drop supplies from Russia, which previously supplied about 40% of the European Union’s gas needs, has left governments scrambling to find alternative energy resources and has prompted fears of possible power cuts and a recession.

Russia has blamed Western sanctions imposed on Moscow for its invasion of Ukraine for hampering pipeline deliveries. European politicians say Moscow is using energy as weapon.

Germany’s RWE (RWEG.DE) said it was “in good and constructive talks” with Qatar about LNG deliveries, before a planned visit by Chancellor Olaf Scholz to the Gulf. Ailing importer Uniper (UN01.DE) said it had not reached a deal yet.

Germany will also be able to count on gas flowing from France from around Oct. 10, the head of France’s CRE energy regulator said, following an announcement by President Emmanuel Macron that the two would help each other with energy supplies.

Although deliveries via the Nord Stream 1 have halted, Russian gas flows to Europe via Ukraine, although much reduced, have continued.

In France, CRE chief Emmanuelle Wargon said that if energy group EDF’s race to repair corrosion-hit nuclear reactors suffers delays, “exceptional” measures this winter could include localised electricity cuts. read more

“But there will be no gas cuts for households. Never,” she told franceinfo broadcaster.

‘DIFFICULT WINTER’

Across the Pyrenees, Spanish Industry Minister Reyes Maroto said obliging energy-intensive companies to close during consumption peaks was an option this winter if required.

The companies would be compensated financially, she said in an interview with Spanish news agency Europa Press, adding there was no need to impose such closures now.

And Finns were warned by national grid operator Fingrid that they should be prepared for power outages. read more

Reflecting the disruptions caused across the continent, Finnish power retailer Karhu Voima Oy said it had filed for bankruptcy due to a sharp rise in electricity prices.

Meanwhile in Germany, Habeck said Berlin will not let large gas importers like VNG become insolvent, while an economy ministry spokesperson said “focused” discussions on aid were ongoing with ailing importer Uniper (UN01.DE). read more

Pipes at the landfall facilities of the Nord Stream 1 gas pipeline are pictured in Lubmin, Germany, March 8, 2022. REUTERS/Hannibal Hanschke

The German economy is contracting already and will likely get worse over the winter months as gas consumption is cut or rationed, the country’s central bank said on Monday.

In Portugal, the government was blunt about its concerns.

“From one day to another, we may have a problem, such as not being supplied the volume of gas that is planned,” environment and energy minister Duarte Cordeiro said, adding that Portugal was working to diversify its supplies to boost energy security.

“Portugal has been preparing, like all of Europe, for what will be a difficult winter,” he said, urging the European Commission to move forward with plans for a joint EU gas purchasing platform and defining import prices. read more

NORD STREAM 1 REQUESTS

Russia, which had supplied about 40% of the European Union’s gas before its February invasion of Ukraine, has said it closed Nord Stream 1 because Western sanctions hindered operations. European politicians say that is a pretext and accuse Moscow of using energy as a weapon.

German buyers briefly reserved capacity on Monday to receive Russian gas via the Nord Stream 1 pipeline, once one of Europe’s major gas supply routes, for the first time since the line was shut three weeks ago. But they soon dropped the requests.

It was not immediately clear why buyers had submitted requests for capacity when Russia has given no indication since it shut the line that it would restart any time soon. read more

Meanwhile, Ukraine accused Russian forces of shelling near the Pivdennoukrainsk nuclear power plant in Ukraine’s southern Mykolaiv region. read more

Since its forces were driven out of Kharkiv, Russia has repeatedly fired at power plants, water infrastructure and other civilian targets in what Ukraine says is retaliation for defeats on the ground. Moscow denies deliberately targeting civilians. read more

‘GOING BACK IN TIME’

European gas storages are now 85.6% full, with stocks in Germany close to 90%, data from Gas Infrastructure Europe showed.

“Stocks are set to continue to be built further, supported by the finalisation of planned maintenance work and increasing Norwegian flows as of this week,” analysts at Energi Danmark said in a morning note.

Europe’s imports of thermal coal in 2022 could be the highest in at least four years, analysts said.

“Europe is going back in time,” Rodrigo Echeverri, head of research at Noble Resources, told a conference.

Oil prices fell by more than 2% on Monday, pressured by expectations of weaker global demand and by U.S. dollar strength ahead of a potentially large interest rate hike, though supply worries limited the decline. read more

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Reporting by Reuters bureaus; Writing by Ingrid Melander; Editing by Edmund Blair, Mark Heinrich, Hugh Lawson and David Evans

Our Standards: The Thomson Reuters Trust Principles.

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