Energy agency says Europe faces ‘unprecedented risk’ of gas shortages

The International Energy Agency (IEA) said there was an “unprecedented risk” to gas supplies in Europe this winter after Russia cut most of its pipelines.

Europe could eventually compete with Asia for already scarce and expensive seaborne LNG, the Paris-based agency said.

In its quarterly gas report, the IEA said EU countries would need to cut their use by 13% over the winter if Russia shuts down production entirely during the Ukraine war.

The group said most of the cuts must come from consumer actions such as turning down thermostats by one degree, adjusting boiler temperatures and industrial and utility savings.

On Friday, the European Union agreed to mandate a reduction of at least 5 percent in electricity consumption during peak hours.

Only a small amount of Russian gas is still piped through Ukraine to Slovakia and across the Black Sea to Bulgaria through Turkey.

Two other routes from the Baltic Sea to Germany and via Belarus and Poland have been closed.

Another hazard in the study is the late winter cold snap, which will be particularly challenging because underground gas reserves flow more slowly at the end of the season due to lower gas and pressure in the gas storage caverns.

The EU has filled storage to 88%, surpassing the pre-winter 80% target. The IEA assumes that 90% is needed in the Russia shutdown scenario.

Businesses in Europe have cut back on gas, sometimes just forgoing energy-intensive activities like making steel and fertiliser, while costs for small businesses such as bakeries are suffering badly.

High prices for natural gas, used for home heating, power generation and many industrial processes in the 19 EU member states that use the euro, set a record consumer inflation rate of 10% and dented the purchasing power of so many economists A recession is forecast for the end of this year and early next year.

European governments and utilities have made up for much of Russia’s shortfall by buying expensive liquefied natural gas (LNG) supplies from countries like the United States and Qatar, and more pipeline supplies from Norway and Azerbaijan.

The goal is to prevent storage levels from falling to the point where the government has to ration gas to businesses.

According to the IEA, gas storage must remain above 33 percent for a safe winter, and below that level there could be a shortage if a later cold snap hits.

Lower levels will also make it harder for Europe to replenish storage next summer, while higher conservation reserves will help bring down extremely high prices.

European leaders say the cuts to Russian gas are energy blackmail aimed at pressuring governments to back Ukraine and sanction Moscow.

As Russia halted the flow of the Nord Stream 1 pipeline to Germany through the lower Baltic Sea this month, it and the parallel Nord Stream 2 — built but never operated after Germany refused certification — were hit by what European governments claim is an underwater explosion. damage. result of destruction.

Demand for liquefied gas has pushed up prices and tightened supply so much that poorer countries in Asia cannot afford it.

Bangladesh is experiencing widespread power outages, while Pakistan faces rolling blackouts and reduced hours for shops and factories to save power.

The agency said: “Interregional competition for LNG purchases could create further tensions as additional European demand puts more pressure on other buyers, especially in Asia, and conversely, a cold snap in Northeast Asia could lead to further tensions. Limit European access to LNG.”

The gas crisis in Europe has also left Asian countries without a limited number of floating regasification terminals, which are expected to play a major role in Southeast Asia’s LNG imports.

Europe has already acquired 12 ships and plans to build 9 more.