Europe approached an energy crisis on Tuesday after the Kremlin cut off gas supplies to major buyers, including Shell.
Russia’s state-owned gas supplier Gazprom said supplies to Shell in Germany and Ørsted in Denmark would be cut off on Wednesday after they refused to give in to Putin’s demands to pay in rubles.
Gazprom cut off supplies to the Netherlands on Tuesday after doing the same in Poland, Bulgaria and Finland this month, fueling gas in the middle of its war in Ukraine.
The FTSE 100 Shell company produces fossil fuels itself, but also has a wide commercial division that buys gas from companies like Gazprom and sells it.
The company said in March that it planned to withdraw from its stake in Russian energy “gradually.” He has now been forced to leave the market immediately.
In response to Gazprom’s statement, Shell said on Tuesday: “Shell has not accepted the new payment terms set by Gazprom.
“We will work to continue supplying our customers in Europe through our diverse gas supply portfolio.
“Shell continues to work on a phasing out of Russian hydrocarbons, in accordance with applicable laws and regulations.”
Shell’s contract cut by Gazprom involves a maximum of 1.2 billion cubic meters of gas per year, delivered to Germany so that Shell can sell them where needed.
The EU imported some 155 billion cubic meters of gas from Russia in 2021, accounting for 40% of its gas consumption.
The Kremlin last month ordered buyers from “unfriendly” countries to pay for gas in rubles, in what was seen as retaliation for sanctions and efforts to isolate Moscow from its war against Ukraine.
Most of Gazprom’s contracts with European buyers remain in place after finding ways to meet demand, and the cut-off amount is believed to be less than 20 billion cubic meters in total.
Ørsted said on Tuesday that its Gazprom supplies would be cut off at 6 a.m. Wednesday.
Mads Nipper, chief executive, said the company “is up and running[s] firm in our refusal to pay in rubles ”.
He added that as there is no direct pipeline between Russia and Denmark, Russia cannot cut the country, but Denmark will have to buy more in the European market.
Nipper said: “We hope this is possible.
“We are in constant dialogue with the authorities and we are confident that the authorities, who have an overview of the supply situation in Denmark, will be prepared for the situation.”
James Huckstepp, European gas analysis manager at S&P Global Platts, said efforts to replace Russian supplies are being helped by lower demand in Asia due to the Covid blockade and other factors, although things are looking up. they will become more difficult by the end of the year.