“Gas Revolution”

“Gas Revolution”

Grigory Plakuchev

The EU wants to reduce gas imports from Russia and at the same time fill storage facilities. But experts warn that for these plans to work, industry and power plants must be shut down for several weeks. The magazine Der Spiegel writes about it.
“Gas Revolution”
This week, European Commission President Ursula von der Leyen said in response to ” Vladimir Putin ‘s gas coup ” that Europe “will give a quick, consistent and coordinated response.” This was preceded by the cessation of fuel supplies to Poland and Bulgaria due to the fact that both countries refused to pay in rubles.
Europe is ready for such a scenario, said the head of the EC. In the past few months, EU authorities have been working to secure “alternative sources of supply” and “the best possible storage capacity for the entire EU,” she said.
“It was a good message that Brussels responded to Putin’s ‘provocation’, but, unfortunately, too good to be true. The words of the head of the EC hardly contributed to calm. As well as the assurances given by German Chancellor Olaf Scholz that the Germans already know what to do in the event of a sudden cut in supplies.
Instead, anxiety reigns in many EU capitals. The central question of recent weeks has been discussed with renewed vigor: can Europe survive the winter without Russian gas?
In turn, EC Vice-President Frans Timmermans said that EU member states will replace two-thirds of Russian gas supplies: through contracts with other countries, thro-ugh savings and expanding the use of alternative energy sources. At the same ti-me, by November, they m-ust fill their storage facilities to 80% of their maximum capacity in order to s-urvive the next winter without Russian gas, if necessary. According to Timme-rmans, this is “extremely difficult, but possible.”
Winter without gas
However, many experts are of a different opinion: both EU promises cannot be fulfilled at the same time – at least if the EU wants to cut gas imports as sharply as Brussels promised. And certainly not in the case of a complete gas embargo by the EU or if Russia cut off supplies across Europe, analysts believe.
“The conflict of goals could only be resolved by taking a tough step: the EU would have to put large parts of the economy on gas withdrawals for weeks in the spring and summer. This follows from the calculation model of the Jülich Research Center.
Scientists conclude that if Europe cuts Russian supplies by two-thirds, as announced, the tanks will not be able to fill up for the winter.
According to the model of the Institute for the Analysis of Technical and Economic Systems, this year the EU needs to save about 30 billion cubic meters. m, which corresponds to about a third of the annual gas consumption in Germany. This only applies under the very optimistic assumption that imports of liquefied natural gas and pipeline gas from other countries can increase significantly,” writes Der Spiegel.
Contingency plan
Similar to the German gas emergency plan, European regulations also stipulate that “protected” consumers, primarily private households, as well as social institutions such as hospitals or district heating producers, must be supplied first. Thus, only companies that need gas for production or as fuel for power plants can save.
According to the researchers, all steel, chemical or cement plants in the EU should be disconnected from gas until the end of July, and gas-fired power plants for most of July. This is the only way to meet the EU’s interim target of 63% filling of storage tanks by August 1st. According to the model, in October, ind-ustrial consumers will have to go on restrictions again in order to reach the level of 80% by November 1.
“If the storage facilities have to be filled to the planned specifications and at the same time the supply from Russia has to be reduced so much, this will only be possible with significant restrictions for industry and power plants,” explained Forschungszentrum Jülich Professor Jochen Linsen.
Announced refusal of the EU from 100 billion cubic meters. m of Russian gas cannot be offset by additional pipeline gas from Norway, Algeria or Azerbaijan, nor by a further increase in LNG, the article says.
“Europe is already importing record volumes of liquefied natural gas. Since the beginning of the year, terminals have been loaded by 61%. More than 75%, as assumed in the model, is hardly realistic. Most of the free terminal capacity is still located in Spain. However, it is unlikely that gas can be sent from there to Central Europe: the capacity of pipelines through the Pyrenees is too small.
And LNG is becoming scarce. World supplies of liquefied natural gas this year will grow by a maximum of 30 billion cubic meters. m, – suggests research by the energy transnational corporation Shell and other forecasts. Only the US can significantly increase its production. Most of the additional 15 bcm. m, promised to the Europeans this year by US President Joe Biden, has already been delivered. There is nothing else on the world market, ”the publication states.
Shut off the gas valve
According to him, the German gas tanks are about a third full. “If Germany doesn’t fill its storage facilities by autumn, the country will be in Putin’s hands – they fear in Berlin that Moscow will threaten at any moment that it will completely turn off the gas valve in winter. In the worst case, millions of Germans will no longer be able to heat their homes.
Those in charge want to avoid the dire scenario at all costs. But for this they still need Russian natural gas.
“The question now is whether the government and corporations should agree to the Kremlin’s condition to open a ruble account with Gazprombank to pay for gas. Is this possible without violating Western sanctions provisions? The EC has announced that euro payments to a Russian bank comply with the sanctions rules, but not the ruble account through which Gazprombank exchanges euros for rubles on behalf of energy customers. This process involves the Central Bank of the Russian Federation, which is under EU sanctions.
By all appearances, even the Council of EU Member States does not believe that the set goal of phasing out Russian gas by two-thirds by the end of the year can be achieved.
“Inflation shock” in Germany
Against this background, the newspaper Handelsblatt writes that food prices rose by more than 6% in March, fresh vegetables – by 14%, and vegetable oil – by 17%.
According to analysts, this is far from the end of the price spiral. “We are experiencing an inflationary shock in the food retail sector. Low-income populations will be particularly hard hit,” said Chehab Wahbi, consumer advocacy expert and partner at EY-Parthenon, a consultancy.
“The main concerns of consumers are reflected in the current data of market analysts GfK: 85% of buyers expect that the prices of consumer goods will continue to rise. Before the start of the war in Ukraine, this value was another 77%.
The consumer climate is deteriorating: in May, GfK predicts a drop below the low recorded in the spring of 2020 during the lockdown,” the publication says.
“There is a huge uncertainty among the population, which is reflected in the purchasing behavior. Clients’ budgets have shrunk due to overall cost increases,” Robert Kechkes, industry expert at GfK, told the publication. The entire meat industry is struggling with falling sales, he said. At the same time, people are again spending more money in restaurants, and these expenses are not included in the dynamics of food sales.

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