Frankfurt, Jan 13 (AP) Europe’s natural gas crisis is not taking its name. Reserves are low. Prices are high. Utility customers are facing expensive bills. Major Russian supplier Gazprom is not selling gas as before.
This all raises the question: is Europe, which imports most of its energy, going to make it through the winter without a gas disaster, especially if the season is colder or longer than usual? Here’s how the EU, home to 447 million people, will try to tackle the crisis:
The problem is low storage levels: Utilities turn to gas stored in underground caverns to handle the sudden excess demand for gas for heating or electricity. Europe started 2021 with only 56 percent gas storage, compared to 73 percent a year ago. The reasons varied: cold weather last winter, lack of Russian deliveries in the spot market and strong demand for liquefied natural gas in Asia that ships. The Union of Pipeline Operators of Europe says cold weather would mean importing 5 percent to 10 percent more gas than the maximum volume seen in recent years to avoid the risk of closure.
As a result, gas prices have risen: the benchmark price in Europe is around €80 per MWh, more than four times the level of €19 in early 2021 and as low as €4 in 2020. Prices have come down. Nine times its level at the beginning of last year. This price shock is affecting utility bills, worrying consumers and politicians.
Europe is relying on higher prices and attracting more supplies: analysts at Rystad Energy used ship-tracking data last month to bring 11 tankers of liquefied natural gas, or LNG, to Asia to take advantage of the lucrative seas Took a U-turn in between. Sales in Europe. Analysts at data firm Energy Intelligence said that with prices so high, traders were tempted to ship goods to Europe, even if they had to pay 100 percent of the price as compensation.
“I wouldn’t say LNG is 100 percent enough, but it will play a very important role in Europe’s energy solutions,” said Shi Nan, head of liquified natural gas markets at Rystad. But he added a caveat: “How much depends on how much Europe is willing to pay.” Russia hasn’t sent much gas: state-owned Gazprom has short-lived gas through its pipelines crossing Poland and Ukraine. and is not filling its European storage as much as it normally does, although it appears to be meeting its requirements on long-term contracts. Analysts believe Russia to Europe Leaving Poland and Ukraine may underline its willingness to approve the Nord Stream 2 pipeline to Germany. Tensions have also risen with Europe over the deployment of Russian troops near Ukraine’s border.
A mild winter is crucial: Weather in Europe and Asia has been relatively mild so far, more liquefied gas is on the way, and higher prices have forced industries to cut production and use less. Meanwhile, Norway has stepped up with more pipeline gas among Europe’s suppliers.
“That means we could go through this winter, because Russian flows are just as low,” said James Huckstep, manager of Europe, Middle East and Africa gas analytics at S&P Global Platts. There’s still the risk of low temperatures, and very little storage buffer.” If there’s an unexpected freeze, “you go to a more extreme scenario, and you can force a gas cutoff—it’ll start with industry, but Ultimately consumers are at risk,” Huckstep said.
In the short term: European governments are offering cash subsidies to reduce the blow to consumers. Sweden announced 6 billion kronor ($661 million) to help families most affected by high electricity prices.
Long term: The solution is more investment in renewable energy such as wind and solar. Yet officials believe the gas will play a role for years during that transition.
Political unrest in Kazakhstan is not contributing: the resource-rich Central Asian country supplies oil to the European Union – but not gas – and oil flows were not affected by violent protests, which began over a hike in fuel prices, But shows widespread discontent. On the authoritarian government of Kazakhstan.
If all else fails: EU law requires countries to help each other in case of gas shortages. Governments can declare a gas emergency and lock industrial customers into homes, damaging the economy but avoiding humanitarian and political disaster.
In theory, they could demand cross-border gas supplies from each other. In recent years, Europe has built more reversible pipeline connections, but not enough to cover the entire continent, leaving some countries more exposed than others.
Yet the system has never been tested, and there are questions about how willing countries would be to share gas in crisis. The European Commission, the executive arm of the European Union, is working on revising the rules to include joint gas purchases, but on a voluntary basis, according to Rouen C. Fleming, energy law blogger and assistant professor at the University of Groningen in the Netherlands.
“The amendment is a fairly clear indication that even those who set up the system don’t think it will work very well,” Fleming said. (AP) India
(This story is published as part of an auto-generated Syndicate wire feed. Apart from the headline, no edits have been made to the copy by ABP Live.)
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