Fri, 09 Dec 2022

Europe faces "unprecedented risks" to its natural gas supplies this winter after Russia cut off most pipeline shipments and could wind up competing with Asia for already scarce and expensive liquid gas that comes by ship, the International Energy Agency said.

The Paris-based IEA said in its quarterly Gas Market Report released Monday that European Union countries would need to reduce use by 13 percent over the winter in case of a complete Russian cutoff amid the war in Ukraine.

"The outlook for gas markets remains clouded, not least because of Russia's reckless and unpredictable conduct, which has shattered its reputation as a reliable supplier. But all the signs point to markets remaining very tight well into 2023," the agency warned.

Much of that cutback would have to come from consumer behavior such as turning down thermostats by 1 degree and adjusting boiler temperatures as well as industrial and utility conservation, the group said.

The EU on Friday agreed to mandate a reduction in electricity consumption by at least 5 percent during peak price hours.

Just a trickle of Russian gas is still arriving in pipelines through Ukraine to Slovakia and across the Black Sea through Turkey to Bulgaria. Two other routes, under the Baltic Sea to Germany and through Belarus and Poland, have shut down.

Late winter cold snap

Another hazard in the study was a late winter cold snap, which would be particularly challenging because underground gas reserves flow more slowly at the end of the season due to less gas and lower pressure in the storage caverns.

The EU has already filled storage to 88 percent, ahead of its goal of 80 percent before winter. The IEA assumed 90 percent would be needed in its Russian cutoff scenario.

Overall gas consumption fell more than ten percent across Europe -- and 15 percent in industry -- between January and August compared with the same period last year, as many firms cut production to allay soaring fuel costs, the IEA said.

Record consumer inflation of 10 percent in the 19 EU member countries that use the euro has sapped so much consumer purchasing power that economists predict a recession at the end of this year and the beginning of next.

European governments and utilities have made up much of the Russian shortfall by purchasing expensive supplies of liquefied natural gas, or LNG, that comes by ship from countries such as the US and Qatar and by obtaining increased pipeline supply from Norway and Azerbaijan.

The goal is to prevent storage levels from falling so far that governments must ration gas to businesses. Gas storage must remain above 33 percent for a secure winter, according to the IEA, while levels below that risk shortages if there's a late cold snap.

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Lower levels also would make it harder for Europe to refill storage next summer, while higher reserves from conservation would help lower extremely high prices.

European leaders say the cutback in Russian gas is 'energy blackmail' aimed at pressuring governments over their support for Ukraine and sanctions against Moscow.

Since Russia halted flows this month through the Nord Stream 1 pipeline running under the Baltic Sea to Germany, it and the parallel Nord Stream 2 - built but never operated after Germany refused to certify it - were damaged in underwater explosions that European governments say are sabotage.

Demand for liquefied gas has driven up prices and put pressure on supply to the extent that poorer countries in Asia cannot afford it. Bangladesh is experiencing widespread power blackouts, while Pakistan faces rolling blackouts and has reduced working hours for shops and factories to save electricity.

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"Interregional competition in LNG procurement may create further tension, as additional European needs would put more pressure on other buyers, especially in Asia, and conversely cold spells in Northeast Asia could limit Europe's access to LNG," the agency said.

The gas crisis in Europe has also deprived Asian countries of the limited number of floating regasification terminals, which were expected to play a major role in LNG imports in Southeast Asia. Europe has secured 12 of the vessels and plans another nine.

(With AP)

Originally published on RFI

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