Russia's invasion of Ukraine threw Europe's dependence on Russian natural gas into sharp relief. The European Union is drafting measures to reduce its reliance on Russian energy, while various European countries, including the biggest economy, Germany, are revising their strategic energy policies, aiming to reduce their energy security vulnerability.
It was this vulnerability that has stopped the EU, the U.S., and allies from slapping sanctions on Russian energy exports (for now). Europe receives some one-third of its natural gas from Russia, but the dependence varies among EU members. Germany is 50-percent reliant on Russian gas, and Italy imports 40 percent of its gas needs from Russia. Southwest European countries Spain and Portugal do not import any Russian gas, but southeast European countries and Russia's neighbors to the west, Estonia and Finland, are 100 percent or nearly 100 percent dependent on Moscow for their natural gas supply.
As the war in Ukraine threatens to cut off Russian gas supply-either in the form of sanctions or a Putin retaliation to sanctions-Europe realized that ensuring energy security would mean weaning itself off Russian deliveries in the quickest way possible, even at a high economic price.
Ensuring gas for next winter should not be a problem, analysts and the European Commission say. The question is, what will Europe do for the winter after that-and all the following winters in the long term-if it wants to reduce its dependence on Russian gas and not shape its security or sanctions policy in fear of being cut off from its largest source of gas.
This winter is nearly at its end, and European gas in storage is back to the five-year range. With restocking during the summer, Europe could go without Russian gas next winter, according to Wood Mackenzie.
"From record lows at the start of winter, storage levels have now re-enter[ed] their five-year range, albeit on the lower side, and are on track to be in a more comfortable position by the end of March," Kateryna Filippenko, principal analyst, Europe gas research, at WoodMac, said.
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"It is our current assessment that the EU can get through this winter safely. At the moment, gas flows from East to West continue, LNG deliveries to the EU have increased significantly, and the weather forecast is favourable. The use of gas from storage has slowed down and we are still around 30% of storage capacity filled," European Energy Commissioner Kadri Simson said on Monday.
EU member states need to collectively ensure a certain level of gas storage in their regions and to conclude solidarity agreements to send gas where it's most needed, Simson said.
"The war against Ukraine is not only a watershed moment for the security architecture in Europe, but for our energy system as well. It has made our vulnerability painfully clear. We cannot let any third country destabilise our energy markets or influence our energy choices," the commissioner said.
"The European Union can manage without Russian gas next winter, but must be united in taking difficult decisions, accepting that in many cases it won't have enough time for perfect solutions," analysts at European think tank Bruegel wrote in an analysis this week.
In the wake of the Russian invasion of Ukraine, Germany announced it was changing course "in order to eliminate our dependence on imports from individual energy suppliers," German Chancellor Olaf Scholz said on Sunday. Germany will build two LNG import facilities, at Brunsbuettel and Wilhelmshaven, and look to speed up the installation of renewable energy capacity to have 100-percent renewable power generation by 2035.
For Europe, managing without Russian gas "will require improvisation and entrepreneurial spirit," analysts at Bruegel say.
"The main message is: if the EU is forced or willing to bear the cost, it should be possible to replace Russian gas already for next winter without economic activity being devastated, people freezing, or electricity supply being disrupted," they noted.
"But on the ground, dozens of regulations will have to be revised, usual procedures and operations revisited, a lot of money quickly spent and hard decisions taken. In many cases time will be too short for perfect answers."
By Tsvetana Paraskova for Oilprice.com
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Comments
Putin will notice the shift in customer attitude. In years past, three-quarters of Russian NG was sold to Europe.
I have seen that Putin is developing new NG sales to other countries, such as India. I am interested to see an article on how quickly Russia can deliver NG to new, more distant customers, and do the pipelines currently exist?
(1)- The global gas market is already facing major shortages, a situation expected to continue for more than 5 years from now if not longer.
(2)- There will be a cut-throat competition between the EU and the Asia-Pacific region for whatever available supplies.
(3-) There is a limit to how much major LNG suppliers like the United States, Qatar and Australia can expand their LNG production capacity in the next five years.
(4)- A major gas supplier like Iran neither has major pipelines to ship its gas to Europe nor has it an LNG export capacity. Another source of gas supplies to the EU is the Caspian but the amount it can pipe through Turkey to the EU isn’t sizeable enough to replace a big chunk of Russian gas supplies.
(5)- Russian piped gas supplies to the EU are far cheaper than LNG.
(6)- Because of far bigger gas and LNG demand in the Asia-Pacific demand, prices there tend to be much higher than in the EU. Therefore major LNG suppliers tend to send the bulk of their LNG to Asia.
(7)- The combined LNG exports of the United States, Qatar and Australia and also Norway’s gas exports can’t replace the 200 billion cubic metres (bcm) of Russian piped gas supplies and 15-16 million tonnes of LNG now or even in ten years from now.
For these reasons, talk about the EU surviving next winter without Russian gas exports is a pipe dream.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
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