Engie office in Paris

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Europe faced a further strain on Russia’s energy supplies as Gazprom told French utility Engie it would cut gas supplies from Tuesday due to disagreements over some contracts.

Moscow has gradually stopped fuel shipments to Europe in retaliation for sanctions linked to its invasion of Ukraine. The cuts, which so far have mostly targeted Germany and Eastern Europe, have plunged the continent into its worst energy crisis in 50 years, sending prices skyrocketing amid fears of supply shortages over the coming winter.

When asked about Engie on Tuesday, Agnes Panier-Lunachet, France’s Minister of Energy Transition, said: “We are preparing for the worst-case scenario. This is a total cut-off.” As reiterated that gas is used.

The announcement follows French Prime Minister Elisabeth Borne’s Monday call to cut energy use this winter or face possible rationing if Russia cuts gas supplies. Far more outages than usual for the aging nuclear reactors of Électé de France are also weighing on energy markets, pushing gas and electricity prices in Europe to record highs.

“Gazprom informed Engie of the reduction in gas deliveries from today due to disagreements between the parties regarding the application of some of the contracts,” the French utility said in a statement on Tuesday. “As previously announced, Engie has already secured the volumes necessary to meet its commitments to its customers and its own requirements, and will not be exposed to direct financial and financial consequences that may result from gas supply interruptions by Gazprom. We have taken several measures to significantly reduce the physical impact.”

Engie shares were trading up 1.3% at 11:58 am in Paris.

Governments across the continent are rushing to reduce Russia’s dependence on energy, drafting plans to distribute fuel if conservation measures fall short. They are also spending tens of billions of euros to partially insulate businesses and households from bill surges as recession risks rise. The European Union is preparing measures to limit electricity prices in the short term and decouple gas and electricity costs in the long term.

With more than 90% of France’s gas storage tanks full, France should have enough fuel to cope with a winter of average temperatures, said Claire Waysand, vice president of Engie. said on Monday. However, she added that during a potential cold snap, things could get tighter.

European Union reserves were filled to 79.4% of capacity as of August 27, compared to a target of 80% by November 1, according to Gas Infrastructure Europe inventory data. Gazprom will stop supplying the Nord Stream pipeline to Germany from August 31, due to planned maintenance for three days.

Gazprom’s supply to Engie has already dropped “significantly” since the Ukrainian invasion, with a recent monthly supply of around 1.5 terawatt hours, the Paris-based company said. This compares with the group’s total annual supply of more than 400 terawatt hours in Europe, it said.

The utility is in talks with Algeria’s Sonatrach as part of a strategy to diversify away from Russian supplies. Weisand said these new medium- and long-term contracts with the North African country would not start this winter.

©2022 Bloomberg LP

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