Significantly lower supply from Russia since last week and forthcoming annual maintenance on Nord Stream that will completely cut off pipeline deliveries for two weeks in July, leaving Europe trying to fill gas storage facilities to a sufficient level before in winter. It was a race against time to fill the storage to 80% even with normal Russian deliveries, but now the race is going uphill as storage injections will be, at least, slow in the coming weeks.
The Russia-Europe gas war has pushed Europe benchmark prices soaring by 50% in just one week and prompted governments in Europe to consider energy-saving measures and switch to coal-fired power to save as much as possible. natural gas. Reduced Russian flows and the shutdown of the LNG Freeport export terminal in the US, which is not expected to return to full operation by the end of this year, have highlighted Europe’s vulnerability to gas supplies and timely filling. its gas storage to prevent winter diet in a few months.
“Our product, our rules”. Russia claims that the reduction in gas supplies is due to “technical reasons” because a gas turbine being repaired in Canada could not be returned in time due to Western sanctions against Moscow. European leaders, including the prime ministers of Germany and Italy – Russia’s top customers and those most affected by the gas cuts – have said that Russia’s move to cut deliveries was a political decision and that Russia’s “technical reasons” were “lies”.
Europe did not have to wait for a response from Russia. “Our product, our rules. We do not play by rules we did not create,” said Alexei Miller, Gazprom ‘s chief executive, on gas supply in Europe last week. This message added to existing concerns that Europe could not rely on Russian procurement to fill its gas depot on time for next winter, and governments began announcing energy and gas saving measures this summer, even if this means firing coal-fired power plants. “Red alert” for EU gas supply Europe is facing a “red alert” for gas supplies next winter, Fatih Birol, executive director of the International Energy Agency (IEA), said last week. “Recent gas supply disruptions, especially to Russia, which is rapidly reducing flows to EU countries, are going to remove some 35 billion cubic meters of gas from the market this year, posing major challenges in replenishment of storage. This is a “A red alert for the EU next winter,” Birol wrote on Twitter on Friday. Not only is Russia restricting supply through the Nord Stream, but it is also refusing to commit to additional capacity through Ukraine. During an auction on Monday, Gazprom did not close additional capacity to transport gas to Europe via Ukraine in July, according to the results of capacity bookings cited by Bloomberg. As a result, Russia’s gas supply to Europe will be low for an extended period and could be further reduced if Moscow decides to deepen supply restrictions. Back to Coal Faced with low Russian supply, Europe is turning to coal-fired power generation in a bid to replace gas in electricity generation as it tries to send gas to storage. EU Member States are now required to reach a minimum level of gas storage by 1 November to protect against possible supply disruptions. By 2023, the target will increase to 90% of full gas storage by November 1st. As of June 20, gas storage in the EU was almost 55% complete, with Germany at 58% and Italy at 55%, according to Gas Infrastructure Europe. Germany will rely more on coal-fired power generation to save gas and fill its gas depot by winter, Economy Minister Robert Hubeck said this weekend. Neighboring Austria plans to convert a gas-fired plant to a coal-fired power plant, while the Netherlands plans to ease current restrictions on coal-fired power plants. At stake is the filling of storage in Europe If Europe does not take additional supply and demand measures, stockpiling this year is in jeopardy, Wood Mackenzie said on Friday. “If Gazprom continues to restrict flows, in both cases storage will be depleted throughout the winter, unless other supply or demand measures are taken, or Gazprom sends additional gas through the available reserved capacity via Ukraine.” although we think this is very unlikely, “said Kateryna Filippenko, director. analyst, Global Gas Research for Wood Mackenzie. “The situation is evolving rapidly and Europe can end up in a world without Russian gas sooner than expected, so preparations must begin now,” Filipenko said. Europe’s struggle to fill gas storage raises European benchmark prices and LNG prices, boosting global energy prices. By Tsvetana Paraskova for Oilprice.com More top readings from Oilprice.com: