Earlier this month, Russia's state gas giant Gazprom said it would need to halt the flow of gas via the Nord Stream 1 pipeline for additional maintenance. The fear this announcement struck in European capitals, even as gas storage fills up ahead of schedule, speaks volumes about Europe's predicament: there is no quick fix to dependence on Russian gas.
As Germany braces up for the suspension of gas flows tomorrow, in Bulgaria-the EU's poorest member-a few hundred people have been protesting every day against the return of the Russian company as the biggest gas supplier to the country.
That return, according to the caretaker government currently in charge of Bulgaria, is inevitable because there are simply no alternative suppliers. According to protesters, U.S. LNG and Azeri gas can substitute Russian pipeline gas.
According to available data about LNG demand in Europe, as cited by government officials, the country would have to wait for months for another LNG cargo as every available import terminal slot in the vicinity has been booked already. And the interconnector supposed to bring Azeri gas via Greece is not operational yet. Meanwhile, storage levels are critically low.
Bulgaria was, according to some, a test case for Gazprom to see how many European buyers would refuse to pay in rubles. They all did-initially. Now, per European Commission directions, payment is done in line with Russian terms but documented as done the moment the buyer sends the euro or dollar payment to Gazprombank, which then converts the amount into rubles and transfers those to Gazprom.
This alone shows that Europe remains dependent on Russian gas and severe interruptions in deliveries would likely lead to chaos, ultimately. The road there is paved with record-high electricity prices.
The day-ahead prices for electricity in Europe for this Monday were close to 660 euro per MWh in Germany and over 730 euro in France, according to Bloomberg's Javier Blas. The lowest price in the region was in Turkey, at a little over 182 euro per MWh. Two years ago, Blas noted, the typical price for electricity across Europe was no more than 50 euro per MWh.
Then there was the case of The Hague, the Dutch city where the court of human rights resides, which this month asked the European Union for a temporary exemption from anti-Russian sanctions because it had failed to find an alternative supplier of gas in time. The Hague, its authorities said, had held a tender for gas suppliers in July but no bidders had made an appearance
Efforts to further reduce intake of Russian gas, however, continue, and the rate of storage cavern-filling is a sign of some success in that respect-some, because this faster rate of storage filling has come at a price that is 10 times higher than what Europe normally pays to fill its gas caverns for the winter.
According to an op-ed in Politico, over the long run, Europe is in the stronger position because it would continue diversifying its gas import sources while Russia would find it hard to diversify its clients since it has a much more modest pipeline network in the East.
The op-ed authors in Politico say this will give Europe leverage; however, who Europe would use this leverage on remains to yet be seen since plans are to completely stop buying Russian gas by 2030 or earlier.
Yet, there will be a price to pay for that, too: not one but several winters of energy scarcity, according to the energy minister of Belgium and the chief executive of Shell. One might hope that Bulgaria and Greece by then will have finally put into operation the notorious interconnector intended to carry Azeri gas to the center of the Balkans.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
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