Contrary to the forecasts made by both sceptics and Russian propagandists, Europe did not freeze this winter, despite almost halving its imports of pipeline gas from Russia. The negative effects of this voluntary 15% reduction in demand (which the EU member states agreed to last summer) were largely offset by the unusually warm weather experienced across the region. The agreement came into force on August 1 2022 and will remain valid until the end of March 2023. However, in order to survive the next winter, Europe needs to come to an immediate agreement on a new (and possibly tougher) gas consumption limit, Belgian think tank Bruegel warns. The same concerns were raised by Russian energy expert Sergey Vakulenko in his article for Re: Russia, in which he stated that Europe’s second year without Russian gas would be far more difficult than the first.
According to estimates made by the experts at Bruegel, in order to meet the October 1 target of 90% capacity across Europe’s underground gas storage facilities (this target was set by the EU Council regulator), European countries will need to consume 7-26% less gas than they have on average over the past five years. The final number will depend on how much gas from Russia continues to be supplied through Ukraine and Turkey, as well as on weather conditions. The starting point for these calculations was February 1, when European storage facilities were at 71% capacity. By the middle of the month, these facilities were at only 66% capacity.
Experts at Bruegel have predicted three possible scenarios for what is to come:
If deliveries through Ukraine and through the TurkStream pipeline continue at 2022’s levels, consumption will need to be reduced by 13% (this number could be as high as 20% in the event of cold weather and as low as 7% in the event of warm weather).
If transit through Ukraine ceases altogether, consumption will need to be reduced by 17% (or by 12% in the event of warm weather, and 24% in the event of cold weather).
If, at the same time, gas stops flowing along the TurkStream pipeline, a 20% reduction in consumption will need to be achieved (15% in the event of warm weather, 26% in the event of cold weather).
When making their predictions, Bruegel has also taken into account the possibility of either a stagnation or a reduction in the production of hydro and nuclear power (the latter is especially relevant given the possibility of sanctions against Russia’s nuclear industry, which Re: Russia recently covered). If this were the case, the reductions that need to be made would increase by several percentage points. However, when making their calculations, the experts take into account an increase in production by French nuclear power plants and hydroelectric power plants in Italy and Spain to reach their five-year average(compared to their fairly modest outputs in 2022).
The volumes of LNG and pipeline gas supplies from other countries (Norway, etc) would need to continue at 2022’s record levels in order for the proposed scenarios to work. Experts at Bruegel believe this to be a real possibility. In 2022, the United States diverted some of their gas supplies, which were initially intended for China, to Europe. China, in turn, increased its pipeline supplies from Russia through the ‘Power of Siberia’ pipeline and supplemented its gas supplies with oil and coal. Given that Europe is willing to pay more (prices are now three to four times higher than they have been in recent years), this strategy will continue to work. However, if China’s economic growth were to accelerate, the feasibility of this scenario may be called into question. So far there have been no indications that this is the case.
Generally speaking, Bruegel’s experts are optimistic about the EU’s prospects. The redistribution of gas between European countries has already largely been established, and this system has been performing better than expected. However, the experts have identified two further key tasks that need to be accomplished: the construction of floating gas storage facilities and the conclusion of long-term contracts with key suppliers.