Vladimir Putin and Russian state-owned energy giant Gazprom are reportedly making a mess of Europe by cutting off the gas supply. The director of the International Energy Agency has recently warned that Europe must prepare now for Russia to shut down any gas imports into the area during the winter. The attack on Ukraine has caused an uprising by nations to cut off imports of energy from Russia however, a new urgency has been brought into these efforts.
What’s happening?
Russia has been removing nations from supplies in an apparent attempt to deter efforts to fill their gas storage before winter. In the last couple of weeks, Gazprom has cut supplies for Europe’s most important natural gas pipeline Nord Stream 1, by 60 percent. This has led to supply cuts throughout Italy, Austria, the Czech Republic, and Slovakia. Gas is also shut off to other countries, including Poland, Bulgaria, France, and the Netherlands. An explosion at the massive Freeport Liquified Natural Gas (LNG) facility on the Texas Gulf Coast – which was used to transport gas to Europe as well as Europe – has also cut off gas supplies.
Does Europe take over Russian gas in the winter?
No chance. Before the war, Russia provided 40 percent of Europe’s supply of gas therefore, the limitations on storage gas or increasing imports of liquefied natural gases (LNG) in some countries, including Germany will make the replacement of Russian gas almost impossible in the near term. EU leaders have minimized the possibility of a complete prohibition on Russian gas, as it is considered to be unpractical and politically controversial.
The nations are instead of striving to fill storage facilities earlier than they normally do. The underground storage facilities in Europe are currently at 57% capacity. The European Commission has asked each nation to achieve at least 80% storage by November with Germany seeking to reach 90 percent by the end of the year. But the absence of Russian gas, these goals will be difficult to reach. “The only way to be able to meet the goal is to pay very expensive costs. The US is exporting LNG into Europe over Asia because countries within Europe are paying more for LNG,” said Investec analyst for oil and gas Nathan Piper.
Where are European countries go to?
European governments are now looking toward the US to provide larger amounts of costly LNG. The UK could profit from the current crisis by increasing the export of natural gas to the EU further by establishing interconnectors. The figures taken from the Office for National Statistics show that exports of goods to the EU increased for the third month in a row in April to PS16.4bn during April this month, which was the highest monthly figure at present prices since comparable records were established in 1997. This was due to the export of crude oil and gas into Europe via the Netherlands in addition to Ireland.
European governments are working to increase the amount of gas piped through Norway or Azerbaijan and increase the utilization of renewable energy sources. While Asian countries, including Pakistan, are finding themselves increasingly forced to switch back to polluting coal in the process of Europe taking over the gas supply.
What happens if they don’t have a replacement for it?
Most likely to happen will be that companies cut down their energy consumption. In Germany which receives 35 percent of its imports of gas from Russia Industries that require energy such as steelmaking are likely to be squeezed and will limit production. “Either governments will impose limits on energy usage or prices will become so high that it will become uneconomic to use,” Piper said. Piper. “There may be a crisis point if Russia shuts off gas flow during the winter months when demand is at its highest. Even during the cold war, Russia was a reliable energy provider. The link is now cut.”
Do Russia’s cutoffs have an impact on the UK? The UK?
The UK has imported only 4 percent of its energy requirements from Russia in the last year and seems to be secure from the gas supply issues. The combination of gas from domestic sources piped supplies coming from Norway as well as LNG imports mean that Britain stands in a favorable position, though it is still vulnerable to price hikes.
But, the business secretary, Kwasi Kwarteng, has been working to expand sources of domestic power if there are knock-on problems with supply this winter. This includes an extension of the lifespan of West Burton A coal-fired power station located in Nottinghamshire. In addition, the government has been discussing with British Gas owner, Centrica to reopen the massive Rough gas storage facility on the coast of eastern England, which was shut down in 2017.
What impact will this have on the consumers?
Consumers will not see any disruption in power supply throughout both the UK and Europe because industrial usage would be limited initially. However, the already high prices appear likely to rise. The annual price cap on energy bills is likely to rise to PS2,980 in October and may rise to PS3,003 in January Research firm Cornwall Insight said this week. If Russian completes the shut-off of gas exports, this may increase the price even more.
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