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 a winter energy crisis by restricting exports to Germany and other countries.
State gas giant Gazprom is burning off, or "flaring," about 4.34 million cubic meters of gas a day at a new liquified natural gas (LNG) facility, according to analysis of heat levels and satellite data by Rystad Energy.
That's equivalent to 1.6 billion cubic meters on an annual basis, or about 0.5% of the bloc's gas demand, and worth about $10 million a day based on last week's European spot gas price. The Rystad analysis was first reported by the BBC on Friday.
The flaring at Gazprom's Portovaya plant is an "environmental disaster," Rystad said, with about 9,000 tons of carbon dioxide being emitted every day. That's the same amount of emissions produced over a whole year by more than 1,100 average American homes.
The plant is close to a compressor station at the beginning of the Nord Stream 1 pipeline, one of the main arteries carrying Russian gas to the European Union.
Rystad said that Russia is burning gas that would otherwise have been exported to Europe through the pipeline, which usually accounts for more than a third of Europe's gas imports but where flows have been throttled back to just 20% of normal levels.
Gazprom, Russia's 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, data from the International Energy Agency shows.
The bloc has been trying to wean itself off Russian gas since the invasion of Ukraine six months ago. It is racing to fill up its storage facilities, cut its demand and secure alternate energy sources to avoid having to ration energy this winter.
So why is Russia sending some of its precious gas up in smoke? It could be part of routine operations — or it could be sending a message to Europe.
"The flaring flame is highly visible, perhaps indicating that gas is ready and waiting to flow to Europe if friendly political relations resume," Rystad said in its note.
The LNG facility at Portovaya is due to open later this year, Rystad said, and flaring often occurs as part of routine safety testing of new plants.
But, "the likely magnitude and duration of this continuous flaring period is quite extreme for this to be the only explanation," it added.
"This sort of burning has never happened in history," Zongqiang Luo, senior analyst, gas and LNG at Rystad, told CNN Business, referring to the levels of radiant heat detected in the area.
"For the Portovaya LNG facility, this kind of flaring is very tremendous," he added.
Henning Gloystein, director of Energy, Climate and Resources at Eurasia Group, told CNN Business that Russia is probably burning gas created as a byproduct during oil production.
"In normal times, much of this gas would have been used to feed into the pipeline grid and sold on to Europe. Because Russia has sharply cut supply to Europe that gas initially went into Russian domestic storage. Those are now likely full, so the gas has nowhere to go, hence it's being flared," he said.
Russia could be facing a number of problems.
Mark Davis, CEO of Capterio, a firm advising energy companies on how to flare their gas, said that the practice is commonplace across Russia.
"I think it's most likely an operational issue that operator Gazprom is struggling with," he told CNN Business. One explanation could be the failure of equipment.
But the location raises questions. Gazprom will likely have transported the gas over a large distance from the Yamal gas field to the Portovaya plant, Rystad said, when it could have been flared closer to the source.
"The cost of compression and transporting gas from the Yamal field to the Baltic Sea is also likely to create unnecessary losses for Gazprom," it said.
Managing Russia's sprawling gas infrastructure is complex, it added, so the choice of location to burn the gas could be down to poor coordination between operators.
Russia might also be sending a message to Europe.
"[Russia] may be making a political point, trying to say [to Europe] 'look we've got this gas, and we're flaring it, you're choosing to make it difficult for us to get it to market,'" Davis said.
Rystad began looking into gas flaring at Portovaya after people in Finland spotted large flames in July.
Russia has been involved in an energy stand off with Europe since it invaded Ukraine in late February. In recent months, Gazprom has slashed flows through Nord Stream 1 over a dispute with the West concerning a missing turbine. It has also cut off supplies completely to other EU states over its insistence that "unfriendly" countries pay for gas in rubles, rather than euros or dollars.
In addition to the CO2 the flare is releasing into the atmosphere, it is also likely damaging the environment in other ways.
Davis said that the flaring would likely be producing soot which is particularly destructive to the Arctic region. Much of the soot will end up on Arctic ice and absorb more heat from the sun, accelerating the melting of ice.
"Almost certainly, the flare is not operating with 100% efficiency, and so it's also emitting methane which is 80 times more potent as a greenhouse gas than carbon dioxide," Davis said.
— Nadine Schmidt and Mark Thompson contributed reporting.