Natural gas prices hit records 0:58
London (CNN Business) --
Russia is burning an estimated $10 million worth of natural gas a day near its border with Finland, analysts say, even as it threatens to push Europe into an energy crisis over the winter by restriction of exports to Germany and other countries.
State gas giant Gazprom is burning some 4.34 million cubic meters of gas a day at a new liquefied natural gas (LNG) facility, according to analysis of heat levels and satellite data by Rystad Energy.
This equates to 1.6 billion cubic meters a year, or about 0.5% of the block's gas demand, and is worth about $10 million a day based on the European spot gas price of In the past week.
Rystad's analysis was first published by the BBC on Friday.
Gas flaring at Gazprom's Portovaya plant is an "environmental disaster", according to Rystad, as some 9,000 tons of carbon dioxide are emitted every day.
That's the same amount of emissions produced in an entire year by more than 1,100 average American households.
This is how the markets are after six months of Russia's war in Ukraine
The plant is near a compression station at the start of the Nord Stream 1 gas pipeline, one of the main arteries bringing Russian gas to the European Union.
advertising
Rystad said Russia is burning off gas that would otherwise have been exported to Europe through the pipeline, which normally accounts for more than a third of Europe's gas imports but whose flow has dropped to just 20% of normal levels.
Gazprom, the Russian state energy company, did not immediately respond to CNN's request for comment.
Overall, gas exports to Europe from Russia are down 77% so far this year compared to the same period in 2021, according to Rystad.
Last year, Moscow accounted for 45% of the European Union's total gas imports, according to data from the International Energy Agency (IEA).
The bloc has sought to weed out its reliance on Russian gas since invading Ukraine six months ago and is racing to fill up its storage facilities, reduce demand and secure alternative energy sources to avoid having to ration power this winter.
So why is Russia fuming some of its precious gas?
It could be part of routine operations, or it could be sending a message to Europe.
"The flame is highly visible, perhaps indicating that gas is ready and waiting to flow to Europe if friendly political relations resume," Rystad said in his note.
Routine procedure?
Satellite images show a gas flare in Portovaya, Russia, on August 7, 2022. European Union, Copernicus Sentinel-2 Images/Handout via Reuters
The Portovaya LNG facility is due to open later this year, according to Rystad, and controlled combustion typically occurs as part of routine safety testing of new plants.
However, "the likely magnitude and duration of this period of continuous burning are extreme enough for this to be the only explanation," he added.
"This type of burning has never happened in history," Zongqiang Luo, principal gas and LNG analyst at Rystad, told CNN Business, referring to levels of radiant heat detected in the area.
"For the Portovaya LNG facility, this type of combustion is really huge," he added.
Henning Gloystein, Director of Energy, Climate and Resources at Eurasia Group, told CNN Business that Russia is likely burning gas created as a by-product during oil production.
"In normal times, much of this gas would have been used to feed the pipeline network and sold to Europe. As Russia has severely cut supplies to Europe, that gas initially ended up in Russian domestic storage. Now it is they're probably full, so the gas has nowhere to go, therefore it's being burned," he said.
Germany announces measures to cut Russian gas consumption to use coal
Operational problems?
Russia could face several problems.
Mark Davis, CEO of Capterio, a company that advises energy companies on how to burn their gas, said the practice is common throughout Russia.
"I think it is most likely an operational problem that operator Gazprom is dealing with," he told CNN Business.
One of the explanations could be an equipment failure.
But the location raises questions.
Gazprom likely transported the gas a long distance from Yamal to the Portovaya plant, Rystad said, when it could have been flared closer to the source.
"The cost of compressing and transporting gas from the Yamal field to the Baltic Sea can also lead to unnecessary losses for Gazprom," he said.
Managing Russia's extensive gas infrastructure is complex, he added, so the choice of where to flare the gas could be due to poor coordination between operators.
The United Kingdom increases the price of gas and electricity by 80%
A message for Europe?
Russia could also be sending a message to Europe.
"It is possible that [Russia] is making a political case, trying to say [to Europe] 'look, we have this gas and we are flaring it, you are choosing to make it difficult for us to get it to market,'" Davis said.
Rystad began investigating the gas flare at Portovaya after large flames were seen in Finland in July.
Russia has been locked in an energy conflict with Europe since it invaded Ukraine in late February.
In recent months, Gazprom has cut flows through Nord Stream 1 over a dispute with the West over a defunct turbine.
It has also completely cut off supplies to other European Union states over its insistence that "hostile" countries pay for gas in rubles, rather than euros or dollars.
An "environmental disaster"
In addition to the CO2 that combustion releases into the atmosphere, it is likely to harm the environment in other ways as well.
Davis said the burning will likely produce soot, which is especially destructive to the Arctic region.
Much of the soot will end up in the Arctic ice and absorb more heat from the sun, speeding up melting.
"Almost certainly, the flare isn't running at 100% efficiency, so it's also emitting methane, which is 80 times more potent a greenhouse gas than carbon dioxide," Davis said.
-- Nadine Schmidt and Mark Thompson contributed reporting.
Environmental pollutionNatural gas