Natural Gas Prices Rise on Israel Concerns and Finland Pipeline Leak

Natural gas prices have jumped this week in Europe on worries about supplies stemming from the conflicts in Israel and Ukraine.

Prices for benchmark European gas contracts are up more than 20 percent since the end of last week. The latest source of concern came after Finland on Tuesday said a pipeline linking the country to Estonia had been damaged, possibly by sabotage. It added to unease in markets the day after the Israeli government ordered Chevron to shut down Tamar, one of the two large gas production platforms the U.S. energy giant operates off Israel’s coast. Israel indirectly exports the gas to Europe via Egypt.

Gas storage facilities in Europe are nearly filled to capacity, easing fears about immediate shortages, and prices remain far cheaper than they were a year ago after Russia shut down most pipeline shipments to Europe. But the incidents highlighted that the continent, which has largely disconnected from Russian gas supplies, remains heavily dependent on imported fuel and could see higher prices persist in the event of a colder-than-average winter or other unexpected disruptions.

On Tuesday the Finnish government raised fears that sabotage may have been involved in a leak detected along an offshore gas pipeline linking Finland and Estonia. Gasgrid, the Finnish transmission operator, on Sunday shut down the line known as Balticconnector after detecting the leak.

In its statement, the Finnish government said the leak was “not caused by the normal gas transmission process.” The government estimated repairs would require several months. Damage was also detected on a telecommunications link between the two countries.

The damage to the pipeline recalled the destruction a year ago of the Nord Stream pipelines linking Russia to Germany, though Balticconnector is a smaller and less strategically important piece of infrastructure. In March, The Times reported that U.S. officials said that intelligence suggested a pro-Ukrainian group was behind the attack on Nord Stream.

Finland recently joined NATO, and intentional damage to critical infrastructure like a natural gas pipeline in Finnish waters would be a matter of concern to the alliance. “If it’s proven to be a deliberate act on NATO critical infrastructure, then this will be of course serious, but it will also be met with a united and determined response from NATO,” Jens Stoltenberg, the NATO secretary general, said at a news conference on Wednesday.

The Finnish government says that its gas supplies were stable and that it could secure what it needed for the winter through a temporary liquefied natural gas terminal. Estonia could obtain gas from Latvia.

Still, “the loss of the Balticconnector leaves both countries exposed to winter shortages, should there be incidents” on other import routes, said Henning Gloystein, a director at Eurasia Group, a political risk firm.

At the same time, the halting of gas supplies from Tamar, the Israeli offshore field, raises questions about how much gas Egypt will have available to export in the form of liquefied natural gas to Europe and elsewhere. Chevron and Israel’s government are likely to prioritize Israeli domestic customers, potentially limiting how much gas is available for Egypt to export. Egypt also may choose to prioritize domestic customers over exports.

Johanna Lemola contributed reporting.