The risk of a difficult winter of gas rationing for industries and another increase in energy bills for consumers in Europe has just increased as Russia increased its gas dispute with the EU by reducing its supply to the EU. main customers.
Russia’s significantly lower supply since last week and the next annual maintenance on Nord Stream that will completely stop deliveries through the pipeline for two weeks in July, leaving Europe struggling to fill gas storage sites to adequate levels before of winter.
It was a race against time to fill the storage 80% even with normal deliveries in Russia, but now the race goes higher, as the injections into the storage will slow down, at least in the next few weeks.
The gas war between Russia and Europe raised European reference prices by 50% in just one week and prompted European governments to consider energy-saving measures and switch to a coal-fired electricity capacity limited to conserve as much gas as possible.
The slowdown in Russian flows and the shutdown at the Freeport LNG export terminal in the United States, which is not expected to return to full operations until the end of the year, highlighted Europe’s vulnerable position in time to purchase gas and fill your gas storage sites on time to avoid a rationing winter in a few months.
“Our product, our rules.”
Russia claims that the reduction in gas supply is for “technical reasons” because a gas turbine being repaired in Canada could not be returned in time due to Western sanctions against Moscow. European leaders, including the prime ministers of Germany and Italy, Russia’s main customers and those most affected by the gas supply cuts, said the Russian move to curb deliveries was a political decision and that “technical reasons “Russians were” lies. ”
Europe did not have to wait for a response from Russia.
“Our product, our rules. We don’t play with rules we didn’t create,” Alexei Miller, Gazprom’s chief executive, said last week about gas supplies to Europe.
This message has been compounded by concerns that Europe cannot rely on Russian supplies to fill its gas storage in time for next winter, and governments have begun announcing measures to conserve energy and gas this summer. even if this involves the activation of coal generation plants.
“Red alert” for EU gas supply
Europe faces a “red alert” for gas supplies next winter, Fatih Birol, executive director of the International Energy Agency (IEA), said last week.
“Recent disruptions in the supply of natural gas, in particular to Russia, which is reducing flows to EU countries, are expected to remove about 35 billion cubic meters of gas from the market this year, which poses major challenges to efforts. “This is a red alert for the EU for next winter,” Birol tweeted on Friday.
Russia is not only reducing supply through Nord Stream, but also refuses to commit to additional capacity through Ukraine. During an auction on Monday, Gazprom did not reserve additional capacity to send gas to Europe via Ukraine in July, according to capacity reservation results quoted by Bloomberg. As a result, gas supplies to Europe from Russia will be low for an extended period of time and could fall further if Moscow decides to push delivery limits further.
Return to coal
Faced with Russia’s low supply, Europe is turning to coal-fired power generation in an effort to replace gas in power generation as it seeks to send gas to storage.
EU member states must now reach a minimum level of gas storage of 80% before 1 November to protect themselves from possible supply disruptions. By 2023, the target will be up to 90% full gas storage on November 1.
Related: China could see another power crisis this summer
On June 20, gas storage in the EU was almost 55% full, with Germany at 58% and Italy at 55%, according to Gas Infrastructure Europe.
Germany will rely more on generating electricity from coal to save gas and fill its gas storage in the winter, its economy minister, Robert Habeck, said this weekend.
Neighboring Austria plans to convert a coal-fired gas plant to run on coal, while the Netherlands is ready to ease its current restrictions on coal-fired power plants.
Europe’s storage is at risk
Unless Europe takes additional supply and demand measures, its storage overload this year is at risk, Wood Mackenzie said Friday.
“If Gazprom continues to restrict flows, in both cases storage will be depleted throughout the winter unless other demand or supply measures are taken, or Gazprom sends additional gas through the reserved capacity available through Ukraine. , although we believe this is very unlikely, “said Kateryna Filippenko, director. analyst, global gas research for Wood Mackenzie.
“The situation is evolving rapidly and Europe may end up in a world without Russian gas sooner than expected, so preparations must begin now,” Filippenko said.
Europe’s race to fill gas storage is driving up European benchmark gas and LNG prices, amplifying the global rise in energy prices.
By Tsvetana Paraskova for Oilprice.com
More main readings from Oilprice.com: