EU Can’t Fill Winter Gas Reserves, Simultaneously Operate Industry Without Russian Supplies: Report

Without Russian supplies, the European Union cannot simultaneously fill up members’ underground gas storage facilities to prepare for next winter and continue to operate industry, Spiegel Business reports, citing the conclusions of a leading German research institute.

According to the Julich Research Centre, a state-sponsored interdisciplinary institution whose areas of expertise include energy and the environment, cutting down on Russian gas deliveries by two thirds, as recently promised by EU officials, would force industrial enterprises to shut down for months at a time as UGS sites are filled up, as there are simply no alternative sources of supply.

According to the institute’s Techno-Economic Systems Analysis centre, the bloc would need to save more than 300 terawatt hours of gas (equivalent to about 30 billion cubic metres, or bcm) this year for storage sites to be filled up to safe levels before winter. And this assumes “the highly optimistic assumption that imports of liquefied natural gas (LNG) and pipeline gas from other countries could be increased significantly”, Spiegel stresses.

The sum total in required savings is equivalent to about a third of the annual gas consumption of EU industrial powerhouse Germany, and over half of the annual maximum capacity of Nord Stream 2 – a 55 billion bcm gas pipeline which was completed last year, but frozen, perhaps permanently, thanks to the crisis in relations between the West and Russia over Ukraine.

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Assuming that private households and critical social services such as hospitals and utilities companies receive priority supplies, Julich concludes that “all steel mills, chemical plants and cement works” across the EU would need to be cut off from gas from May until the end of July, with gas-fired power plants to remain idle for almost all of July.

This would allow Brussels to reach its goal of 63 percent USG capacity by 1 August, with industry forced to make further sacrifices in October for 80 percent capacity to be reached by 1 November as required.

Spiegel emphasises that the estimated cut of around 100 bcm of Russian gas announced by EU Commission Vice President Frans Timmermans cannot be compensated by additional pipeline gas from Norway, Algeria, or Azerbaijan, nor by a further increase in the purchase of LNG. On top of that, the remaining LNG terminal capacity is nearing its peak, with pipelines in Spain, where some spare capacity does exist, insufficient to send gas east to Central Europe.

Furthermore, LNG supplies themselves – already responsible for record price hikes in the autumn and winter of 2021, are becoming more and scarcer as producers struggle to meet unprecedented artificial demand. Global LNG capacity is expected to increase by a maximum of 30 bcm, with most of the 15 bcm promised to Europe by Washington already delivered, and Qatar, another major LNG producer, committing about 80 percent of its supplies to the Asian market.

Citing Julich’s conclusions, Spiegel suggests that Berlin is in a catch 22, with Berlin “fearing” that Moscow could “blackmail” it come autumn to avoid the prospect of millions of Germans freezing. But for this to be avoided, Germany needs to bite the bullet and pay for Russian natural gas in rubles, even if this means violating Western sanctions.

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Russia’s Gazprom suspended gas supplies to Bulgaria and Poland on Wednesday due to their refusal to pay in rubles.

European Commission President Ursula von der Leyen instructed countries and corporations to hold the line on ruble payments on Wednesday, warning that companies with Russian contracts should “not accede to the Russian demands” or face the “high risk” of secondary sanctions.

On Thursday, US President Joe Biden promised to “help” its European allies diversify supplies. “We will not let Russia intimidate or blackmail their way out of these sanctions. We will not allow them to use their oil and gas to avoid consequences for their aggression”, he said.

Critics of Washington’s position have pointed to the lopsided penalties of rejecting Russian energy, with the US purchasing no Russian gas, and depending on Russian oil for less than 2 percent of its domestic gas consumption, while Europe depends on Russian gas supplies for about 40 percent of its total needs last year.

Russian President Vladimir Putin asked the government and Gazprom to work out a scheme requiring countries that have sanctioned Russia to pay for natural gas supplies in rubles in late March. The decision was made after the US and its allies tanked the value of the ruble against other currencies and froze nearly half of Russia’s $642 billion reserve cushion in their banks.

On Thursday, Alternative for Germany party co-chairman Tino Chrupalla offered one potential way for Berlin and Moscow to end the standoff while saving face: agreeing that Germany can continue paying for gas in Euros in exchange for the launch of the Nord Stream 2 pipeline.

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Former Social Democratic Chancellor Gerhard Schroeder warned last week that Russia could not be isolated over the long term, and that in addition to Russian energy, Germany and other EU countries depend on their eastern neighbour for other resources, including rare earth metals.

Last month, German chemicals giant BASF CEO chief Martin Brudermuller suggested that a German boycott of ruble-priced gas would constitute a “highly irresponsible experiment” which could “destroy our entire economy” and “lead to the worst crisis for the German economy since the end of World War II”.

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