relishes blackmailing an apprehensive and intimidated Europe with access to natural gas. His game: threatening that Russia will deliver only 40%, 20%, maybe even zero if you don’t do what he wants. Governments hang on his words without asking whether his threats are credible. The International Energy Association warns that Mr. Putin might cut off gas to the European Union entirely. But that would require a complete shutdown of the Nord Stream 1 pipeline, and every petroleum engineer knows the consequences for Mr. Putin would be dire.
In gas markets, a gathering system transports gas from fields. This system connects to a pipeline, which transports gas to customers. Transactions between buyers and sellers are usually governed by long-term contracts that promise sufficient revenue for construction, operating costs and profits to satisfy demand at the other end of the pipeline.
That Gazprom, Russia’s state-run gas company, isn’t an investor-owned for-profit enterprise complicates conventional economic analysis. Gazprom serves as an instrument of Russian foreign policy. Its Nord Stream pipeline transports gas to the EU through its northern route. The pipeline draws its gas from fields in Russia’s remote Arctic areas, including Yamalo-Nenets. This gas enters the pipeline at Vyborg, close to the Finnish border. It then flows under the North Sea to Greifswald, Germany, and enters the EU distribution system. A parallel undersea pipeline, Nord Stream 2, has yet to enter into service.
Nord Stream’s capacity is 62 billion cubic meters a year. From 2019-21, Gazprom shipped annually some 55 billion cubic meters of gas through Nord Stream, and it operated at this rate—near capacity—up to the Feb. 24 invasion of Ukraine.
We don’t yet know how much pipeline capacity will be used in 2022, but, in late July Nord Stream operated around 40% capacity. After a return to service, following so-called routine maintenance in July, flow fell to 20% of capacity. Gazprom’s threat of further stoppages materialized as it again shut down deliveries for three days at the end of August for maintenance.
If the pipeline operates at 20% of capacity for the rest of the year, Gazprom would transmit about 19 billion cubic meters of gas to the EU via Nord Stream in 2022. This gas will be drawn from fields that in the preceding three years produced about…
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