Released August 01, 2022 | GALWAY, IRELAND
en
Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--The European Commission (EC) is calling on Member States to cut their gas use by 15% from August 1 of this year until 31 March 2023 in preparation for further disruptions of gas supply, or a full cut-off, by Russia.
The call is voluntary for now and forms the key element of Europe's Save Gas for a Safe Winter plan, as fears grow that the European Union (EU) will struggle to fill gas storage capacities before the onset of winter as well as fail to secure enough additional supplies typically needed during the winter period. Natural gas represents 24% of overall gross inland energy consumption in Europe. Russia has been the main gas supplier of the EU and as of last year, the EU relied on Russia for more than 40% of its gas supplies.
Since last year, Russian gas supplies to the EU have been declining markedly in what the EC called "a deliberate attempt to weaponize energy." The situation has worsened since Russia invaded Ukraine in February this year. In June 2022 gas flows from Russia to the EU were less than 30% of the average of recorded in the period 2016-2021. However, if the situation worsens, the proposed regulation would allow the Commission to declare, after consulting Member States, a "Union Alert" on security of supply, imposing a mandatory gas demand reduction on all Member States. Member States have voted in favor of the voluntary Save Gas for a Safe Winter plan with some exceptions. Those countries that are not interconnected to other member states' gas networks are exempted from mandatory gas reductions as it would not benefit other EU members. Those countries whose electricity grids are not synchronized with the European electricity system and are heavily reliant on gas for electricity production are also exempted to help avoid electricity supply problems.
European Commissioner for Energy Kadri Simpson explained: "It is impossible to predict with full certainty how much gas we will need in the upcoming winter and beyond. This depends on the severity of the weather, especially in winter, volumes of alternative gas supplies reaching Europe, global gas demand and other factors. Our assessment shows that in case of a full disruption in July, we would face a gap of 30 billion cubic meters (Bcm) in an average winter and 45 Bcm in a cold winter. We also must take into account the need to fill and refill storage. 45 Bcm corresponds to a 15% cut in our usual gas consumption between the beginning of August and the end of March. That's why we have pointed to this percentage as the target all Member States should strive forward."
"The EU has faced a series of sudden, unwarranted, and unilateral actions by Russia to reduce or stop deliveries to European customers, disrupting economic activity and driving prices upwards," the EC stated. "Pipeline flows of gas from Russia across Belarus have stopped and have steadily decreased through Ukraine. Supply to the Baltic States, to Poland, to Bulgaria, to Finland has also stopped. Supply to several countries, including Poland, Germany, Austria, Denmark, Slovakia, the Netherlands and Italy has been reduced. Since mid-June 2022, flows through Nord Stream 1, one of the largest import routes to the EU, have been cut by 60%."
In its bleak outlook, the EC pointed out that the ongoing reductions have led to historically high and volatile energy prices, contributing to inflation and increasing the risk of an economic downturn in Europe as well as significant negative employment effects and distributional impacts. "These are likely to trigger a rise in energy poverty and also risk deepening inequalities between Member States and regions," it added. "There is no reason to believe this pattern of behavior which creates supply uncertainties and accompanying soaring prices will change. Rather, a number of signals point to a likely deterioration of the gas supply outlook."
Commission President Ursula von der Leyen elaborated following the launch of the Save Gas plan: "Today, we have 12 Member States that are hit by a partial or total cut-off of Russian gas supply. And overall, the flow of Russian gas is now less than one-third of what it used to be, for example, at the same time last year. Russia is blackmailing us. Russia is using energy as a weapon. Therefore, in any event, whether it is a partial or a major cut-off of Russian gas, or a total cut-off of Russian gas, Europe needs to be ready. We do not start from scratch and that is good -- we have already done a lot to reduce our dependence on Russian fossil fuels overall. We have set up a joint gas storage. The storages are now filled at 64%. We set up an EU Energy Platform for joint purchase. We have proposed our REPowerEU plan. And you know that it is based on two pillars. The first one is on supply; increase the supply from other trustworthy sources than the Russian one. The second pillar is reducing the demand for gas overall."
Industrial Info reported in May on the Commission's 300 billion-euro (US$306 billion) plan to cut Europe's reliance on Russian oil and gas, called REPowerEU. The funding will be divided across a wide range of energy areas with the bulk--113 billion euro (US$115 billion)--going to renewables. For additional information, see May 19, 2022, article--Europe Proposes $220 Billion Boost To End Reliance on Russian Energy.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
The call is voluntary for now and forms the key element of Europe's Save Gas for a Safe Winter plan, as fears grow that the European Union (EU) will struggle to fill gas storage capacities before the onset of winter as well as fail to secure enough additional supplies typically needed during the winter period. Natural gas represents 24% of overall gross inland energy consumption in Europe. Russia has been the main gas supplier of the EU and as of last year, the EU relied on Russia for more than 40% of its gas supplies.
Since last year, Russian gas supplies to the EU have been declining markedly in what the EC called "a deliberate attempt to weaponize energy." The situation has worsened since Russia invaded Ukraine in February this year. In June 2022 gas flows from Russia to the EU were less than 30% of the average of recorded in the period 2016-2021. However, if the situation worsens, the proposed regulation would allow the Commission to declare, after consulting Member States, a "Union Alert" on security of supply, imposing a mandatory gas demand reduction on all Member States. Member States have voted in favor of the voluntary Save Gas for a Safe Winter plan with some exceptions. Those countries that are not interconnected to other member states' gas networks are exempted from mandatory gas reductions as it would not benefit other EU members. Those countries whose electricity grids are not synchronized with the European electricity system and are heavily reliant on gas for electricity production are also exempted to help avoid electricity supply problems.
European Commissioner for Energy Kadri Simpson explained: "It is impossible to predict with full certainty how much gas we will need in the upcoming winter and beyond. This depends on the severity of the weather, especially in winter, volumes of alternative gas supplies reaching Europe, global gas demand and other factors. Our assessment shows that in case of a full disruption in July, we would face a gap of 30 billion cubic meters (Bcm) in an average winter and 45 Bcm in a cold winter. We also must take into account the need to fill and refill storage. 45 Bcm corresponds to a 15% cut in our usual gas consumption between the beginning of August and the end of March. That's why we have pointed to this percentage as the target all Member States should strive forward."
"The EU has faced a series of sudden, unwarranted, and unilateral actions by Russia to reduce or stop deliveries to European customers, disrupting economic activity and driving prices upwards," the EC stated. "Pipeline flows of gas from Russia across Belarus have stopped and have steadily decreased through Ukraine. Supply to the Baltic States, to Poland, to Bulgaria, to Finland has also stopped. Supply to several countries, including Poland, Germany, Austria, Denmark, Slovakia, the Netherlands and Italy has been reduced. Since mid-June 2022, flows through Nord Stream 1, one of the largest import routes to the EU, have been cut by 60%."
In its bleak outlook, the EC pointed out that the ongoing reductions have led to historically high and volatile energy prices, contributing to inflation and increasing the risk of an economic downturn in Europe as well as significant negative employment effects and distributional impacts. "These are likely to trigger a rise in energy poverty and also risk deepening inequalities between Member States and regions," it added. "There is no reason to believe this pattern of behavior which creates supply uncertainties and accompanying soaring prices will change. Rather, a number of signals point to a likely deterioration of the gas supply outlook."
Commission President Ursula von der Leyen elaborated following the launch of the Save Gas plan: "Today, we have 12 Member States that are hit by a partial or total cut-off of Russian gas supply. And overall, the flow of Russian gas is now less than one-third of what it used to be, for example, at the same time last year. Russia is blackmailing us. Russia is using energy as a weapon. Therefore, in any event, whether it is a partial or a major cut-off of Russian gas, or a total cut-off of Russian gas, Europe needs to be ready. We do not start from scratch and that is good -- we have already done a lot to reduce our dependence on Russian fossil fuels overall. We have set up a joint gas storage. The storages are now filled at 64%. We set up an EU Energy Platform for joint purchase. We have proposed our REPowerEU plan. And you know that it is based on two pillars. The first one is on supply; increase the supply from other trustworthy sources than the Russian one. The second pillar is reducing the demand for gas overall."
Industrial Info reported in May on the Commission's 300 billion-euro (US$306 billion) plan to cut Europe's reliance on Russian oil and gas, called REPowerEU. The funding will be divided across a wide range of energy areas with the bulk--113 billion euro (US$115 billion)--going to renewables. For additional information, see May 19, 2022, article--Europe Proposes $220 Billion Boost To End Reliance on Russian Energy.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
