Germany Sees Independence in Rosneft Swoop: Energy Update

(Bloomberg) — Berlin is taking over Russian oil major Rosneft PJSC’s German oil refineries, part of a broader move to seize control of swathes of the economy as it tries to secure energy supplies.

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In parallel, the government is working on a plan to take over Uniper SE and two other gas importers, as a series of government rescue measures are being dwarfed by the scale of the crisis.

There was no immediate reaction from Moscow on Friday, which is already squeezing gas supplies to Europe, crippling the economy in retaliation for the continent’s support of Ukraine. Benchmark gas prices declined as traders take stock of government efforts to ease the crunch.

Key Developments:

Germany tightens control over industry with Russian oil grab
Berlin is also working on historic takeover of three gas companies
Poland considers stake in seized oil refinery
Volkswagen is offloading a massive gas hedge
Italy expands tax credits for companies …
… and ArcelorMittal furloughs workers in Spain
Gas prices drop 12% as traders take EU measures seriously

(Timestamps in London.)

European Gas Closes at 7-Week Low (5:22 p.m.)

Europe’s gas prices posted a third weekly decline, contracting 9.3% week-on-week. The benchmark contract at the Dutch hub settled at 187.79 euros a megawatt-hour, the lowest since July 25.

Poland Weighs Stake in Seized Refinery (3:16 p.m.)

Poland’s government and its biggest oil company, PKN Orlen SA, are in talks about boosting cooperation with and potentially buying a stake in the Schwedt refinery, according to a senior cabinet official. Germany seized the local unit of Rosneft PJSC, including the plant, as it moves to take control of its energy industry.

“We want to help Germany cut its dependency on Russian fossil fuels,” Polish Climate Minister Anna Moskwa told Bloomberg during a visit to Vilnius. “Purchasing shares in the refinery is one of the options” being discussed at the government and company level, along with processing more oil for Germany, she said.

Gas Prices Drop Further, Extending Weekly Loss (3:15 p.m.)

European gas prices continued to slide as governments take action to stem the crisis. Benchmark Dutch front-month futures plunged as much as 13% to 187.30 euros per megawatt-hour and set for a third weekly loss. The UK equivalent hit its lowest level since late July before the long weekend in Britain. German year-ahead power prices declined as much as 5.6%.

Volkswagen Set for Massive Gas Windfall (1:14 p.m.)

German car-maker Volkswagen is selling 2.6 terawatt-hours of gas it had bought in advance, potentially netting a windfall of around $400 million. The company is facing pressure to keep burning coal at its power plants in order to save gas that the country desperately needs.

Germany Earmarks EU1 Billion for Refinery Plan (1 p.m.)

The German government has earmarked about 1 billion euros for Schwedt, including aid for the region. It’s a broad package to be disbursed over several years.

Scholz: Ready for Russian Oil Halt (12:55 p.m.)

Chancellor Olaf Scholz said the country is prepared in case Russia retaliates to the move by cutting oil deliveries to Germany.

One refiner has already warned it’s preparing for such a reaction from Moscow.

Germany, along with other EU members, is set to stop receiving Russian oil in any case later this year.

Scholz Says Schwedt Swoop Means Independence (12:35 p.m.)

Chancellor Olaf Scholz said the move to take over the Rosneft unit frees Germany from dependence on Moscow.

“We are making ourselves independent of Russia, and any decisions that are taken there,” Scholz said at a news conference alongside Economy Minister Robert Habeck.

Italy Expands Tax Credits for Energy-Intensive Companies (12:30 pm)

Italy has approved a new aid package to boost support for companies squeezed by energy costs. Starting October, companies will be able to access tax credits ranging from 25% to 40% based on their energy needs. The government also extended the current system of credits until the end of September and introduced a state guarantee on loans.

It is Mario Draghi’s last act as prime minister before the country’s general election next week.

Fortum Readies Finnish Plant for Commercial Use (11:35 a.m.)

Fortum says it will start preparing its Meri-Pori power plant in Finland for commercial use after Finland’s Energy Authority rejected its bid to include the unit for peak-load reserve capacity in the tendering process, the utility said in a statement.

Germany’s Rosneft Grab to Test Oil Infrastructure (11:30 a.m.)

Germany’s seizure on Friday of Russian oil assets has been a possibility for months, but the measure kicks off what promises to be a stern test of Berlin’s contingency planning. Replacing lost flows will be the most pressing challenge, but one that Germany was already going to have to undertake because of plans to stop imports from Russia.

France-UK Nuclear Project a Priority (11:23 a.m.)

The immediate shared economic priority for France and the UK is to speed up work to create Electricite de France SA’s Sizewell C nuclear power station in eastern England, French Finance Minister Bruno Le Maire said. France fully supports the 3.2-gigawatt project, Le Maire told Kwasi Kwarteng on Friday in their first phone call since his British counterpart took up the new role.

Germany, Poland Continue Oil Talks (11:15 a.m.)

Governments in Berlin and Warsaw have been holding talks for months over Germany’s ability to secure oil supplies from Poland, German Economy Ministry spokeswoman Annika Einhorn said at a regular news conference in Berlin. Europe has shunned Russian oil following Moscow’s invasion Ukraine. The decision is up to Poland, she added.

Different types of non-Russian oil have been arriving via Rostock, Germany, recently, Einhorn added. Tests have shown that it can be processed at the Schwedt refinery, which is running at partial capacity.

Romanian Parliament to Curb Demand (11:13 a.m.)

Romania’s parliament, the largest building in Europe, will reduce hours when it’s lit up at night as part of efforts to cut energy costs. The building, ordered by communist leader Nicolae Ceausescu and known as the People’s House, will be lit up only for two hours during the night and will switch to LED-based bulbs, the parliament said in a statement.

Trading Houses Central to Highly Lucrative Trades (10:48 a.m.)

While utilities are buckling under margin calls, sparking fears of Lehman Brothers-like contagion risk across Europe’s energy sector, major trading houses are in a better position. Since previous stresses, they’ve cut trading volumes and moved more business off exchanges — easing margin pressures — while boosting credit-line buffers and equity to secure more loans if needed.

The shift has kept the clutch of largely private trading houses at the center of what are now highly lucrative trades, while enabling them to keep supplying much-needed gas and power to buyers, often for eye-watering profits.

Netherlands Secures Nitrogen to Process Gas (10:40 a.m.)

The Dutch gas-transmission network operator asked for one of the country’s nitrogen-producing plants to delay maintenance to help ensure stable fuel supplies. Nitrogen is needed to enable the country to use imported gas.

Also See: Netherlands Buys Up Diesel Before Winter, Sanctions on Russia

German Rosneft Grab Includes Stakes in Italy, France, Austria (10:20 a.m.)

Germany’s takeover of Russia’s Rosneft entity also includes stakes in business units in Italy, France and Austria, according to a paper published by energy regulator BNetzA. The regulator’s trusteeship over the Russian units is limited to March 15, 2023.

Germany ‘Can Stop Russian Gas Imports by End of 2023’ (10:15 a.m.)

Chancellor Olaf Scholz said Germany’s push to expand LNG imports via new terminals on the north coast will mean it’s able to end purchases of Russian gas by the end of 2023.

“We will have established so much import infrastructure by the end of next year that we can, with complete certainty, guarantee supply of our country also without Russian gas,” Scholz said during a Q&A in Berlin. “This will then at the latest also have an impact on prices,” he added.

EU Spoke With Qatar About Gas Meant for Asia (9:31 a.m.)

European Council President Charles Michel said that he discussed with Qatar the possibility of rerouting gas meant for Asia to Europe in the short term.

The issue would first have to be discussed with the Asian nations, Michel told reporters in Brussels.

Uniper Shares Plunge (9:20 a.m.)

Shares in Uniper dropped for a fourth day, down as much as 16% to a record low after Bloomberg reported the government is close to taking control of the company.

Fortum Wants Its Money Back for Uniper (9:04 a.m.)

Fortum OYJ has already granted loans to Uniper but made clear earlier this year it didn’t want to keep extending credit. Any deal in which Germany takes control, would mean giving partly state-owned Fortum its money back.

“It is very clear that Finland will not agree that Germany could nationalize Uniper without compensation,” Finland’s ownership steering minister Tytti Tuppurainen. “We also maintain that the 8 billion euro financing provided by Fortum to Uniper will still be available to us.”

Germany Worried About Systemic Failure: RBC (9:00 a.m.)

Willingness in Berlin to provide further bailout support to Uniper shows “clearly the government is worried about systemic failure in imports of gas into Germany,” John Musk, analyst at RBC Europe Ltd said.

A takeover is complicated by Fortum’s 78% stake in Uniper but RBC expects the German government to press on given the strategic importance of securing gas supplies ahead of winter.

Gas Prices Slip in Early Trading (7:18 a.m.)

Benchmark European gas futures fell as much as 3.9% to 206 euros per megawatt-hour. Trading has been volatile in recent days as traders take stock of various government plans to ease the crisis. For now, prices are little changed on the week.

UK to Meet Energy Firms Next Week (6:30 p.m. Thursday)

The UK government is set to meet with some of the country’s biggest power producers to push through a measure that would cap wholesale electricity prices starting this winter for low carbon sources of electricity. UK Business Secretary Jacob Rees-Mogg is pushing to quickly agree long-term contracts with energy sources like wind farms, nuclear plants and biomass-burning stations.

France Steps Up Target to Cut Power Use (5:30 p.m. Thursday)

The French government hiked its target to reduce energy consumption this winter and avoid energy outages in a bid to shake up public awareness.

Prime Minister Elisabeth Borne urged households, businesses and local and national authorities to cut their power use by 10% compared to last year, according to a presentation sent to reporters following a press conference. Emmanuel Macron’s government had previously put forward a target to reduce consumption by that amount within two years.