Gazprom prepares to cut off supplies to Engie as payment row escalates

By Silvia Aloisi

PARIS (Reuters) -A dispute over gas supplies between Engie and Gazprom escalated on Wednesday as the Russian company prepared to halt all deliveries to its French contractor from Sept.1, citing missing payments.

The row came as Russia stopped European gas deliveries via the Nord Stream 1 pipeline from Aug. 31 to Sept. 2 for maintenance, deepening concerns about the region's winter energy supply.

Gazprom explained its decision, announced late on Tuesday, to suspend gas supplies to Engie was down to Engie not paying in full for July deliveries of gas.

An industry source in Paris said Engie had deducted from the payment "compensation" for the fall in gas supplies in recent weeks. The source did not quantify the amount deducted, adding only that it was too early to say whether the dispute between the two companies could be resolved soon.

The Nord Stream pipeline, in which Engie has a 9% stake, has been running at 20% capacity, fuelling accusations by European governments that Russia is using energy supplies as a "weapon of war" in retaliation for Western sanctions imposed after it invaded Ukraine.

Moscow denies doing this and has cited technical reasons for supply cuts.

Russia now accounts for less than 4% of Engie's gas imports compared with 17% before the war in Ukraine, with supply in recent months falling to just 1.5 terawatt-hours (TWh), the utility, France's biggest supplier of gas to households and companies, said.

Engie says it had diversified its supply in preparation for a possible halt to Russian gas deliveries. The shutdown in flows from Gazprom would not significantly impact Engie's ability to serve its customers in France and Europe, the industry source said.

France's energy minister said overnight Gazprom was using a mere excuse to switch off natural gas deliveries to Engie. European governments fear further supply cuts will heighten an energy crunch that has already sent wholesale gas prices soaring more than 400% since August last year.

"As we anticipated, Russia is using gas as a weapon of war and is using Engie's way of applying the contracts as a pretext to further reduce French supplies," Energy Transition Minister Agnes Pannier-Runacher said.

France had reduced its exposure to Russian gas imports to 9% from roughly double that amount before the invasion of Ukraine, she added.

The head of France's energy regulator (CRE) Emmanuelle Wargon said the country would have sufficient gas supplies to get through the winter but that lower nuclear power output meant it may have to temporarily import power.

France will fill its gas stores by the end of September or early October, officials say.

"For gas, the price is a bigger worry than getting the volume we need," Wargon said. "Current power prices reflect the worst-case scenario."

The most taxing situation would be high demand in the event of an exceptionally cold winter coupled with low supply of renewable energy during dark, windless days.

(Additional reporting by Elizabeth Pineau, Camille Raynaud and Jean Terzian; Writing by Tassilo Hummel and Silvia Aloisi; editing by Richard Lough, Kirsten Donovan)