Faced with a serious energy crisis, where governments will be forced to impose energy bills on households and industries, Europe will find itself in the event that the Russian president Vladimir Putin decides to turn off its taps natural gasin retaliation for Western sanctions or the abandonment of the Nord Stream 2 pipeline, warns the Eurasia Group.
According to the analysis of the House of Geopolitical Research, European utilities are already preparing for the disruption of gas supplyas a result of Western sanctions, at a time when Europe is dependent on Russia for 40% of its gas imports.
“As Western governments prepare for their response (to Putin’s aggression), energy providers are struggling to ensure they have enough gas to survive the winter heat,” said Eurasia Group analysts.
Disturbance of supply is possible
Eurasia believes that problems in the supply of gas are likely to arise, either due to damage to the pipelines or in the event that Moscow decides to close the tap.
So does Europe have enough gas to produce in the winter? Following its efforts to import LNG from around the world in December, the EU has enough gas stored to reach the spring, when consumption is usually reduced by a third due to rising temperatures, analysts say.
Is there enough gas?
The large reserves of Germany and Italy will play a key role, Eurasia estimates, as they can be channeled to Poland, the Czech Republic and Slovakia, as these countries have fewer alternatives to Russian gas.
“The stored gas is probably enough to avoid significant restrictions, as Ukraine’s role as a gas transit route is diminishing,” analysts said.
Annual volumes to the EU are down from 100 billion cubic meters (bcm) a decade ago to just 40 bcm right now, as Moscow has invested heavily in alternative pipelines.
Gas reserves in NW Europe, where the largest storage facilities are located, are around 141 TWh. These are levels that while they are the lowest for the season since the cold winter of 2017/2018, are not much lower than the 155 TWh that were left at the end of last winter.
“However, with stocks at low levels at the end of winter, European utilities will have to spend a lot of money to rebuild these stocks next spring and summer, to prepare for next winter and the possibility of further disruptions. in supplies “, the analysts note. And they stress that this means keeping European gas and LNG prices globally high throughout 2022.
What will happen if the tap is closed
If Putin decides to cut off gas supplies to Europe altogether (around 180 bcm a year), most likely in retaliation for sanctions or the cancellation of Nord Stream 2, then a much more serious energy crisis will ensue.
In this case, governments may be forced to mandate energy-intensive industries – e.g. steel or automobile industries – reduce their production to protect households during the winter weeks. In fact, Eurasia does not rule out the possibility of imposing a power bill even on households, to prevent uncontrolled blackouts.
The permanent reduction of dependence on Russia
Given the frequent problems with the supply of Russian gas through Ukraine (such as during the cold winter of 2008/2009 and the global financial crisis), European governments and utilities are drawing up plans to improve their resilience to these crises. .
One of the first measures will be the publication of a Commission document on energy policy on 2 March, with the draft proposing minimum levels of gas storage for member states. The Eurasia Group estimates that the current crisis increases the chances of this proposal being adopted.
Particularly in Germany and Italy, ways are being sought to reduce Russia’s dependence on natural gas, with Germany expanding its plans for LNG imports through the planned Brunsbuettel terminal (from 2023) and existing terminals in the Netherlands and Belgium. Berlin is also accelerating production through wind and hydroelectric plants.
Italy is fast-tracking the replacement of household gas boilers with alternatives, such as heat pumps, and is seeking more supplies from countries such as Algeria, the United States and Azerbaijan.
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