EU countries have decided to reduce gas consumption by 15%. What is important to know

Against the background of disruptions in supplies from RUSSIA, the EU decided to reduce gas consumption by 15% from August 1, 2022 until the end of March 2023. RBC figured out

On Tuesday, July 26, EU countries reached a "political agreement" on a voluntary reduction in gas consumption by 15% compared to the average for the past five years in the next eight months - from August 1, 2022 to the end of March 2023. Countries will be able to choose the measures by which they will reduce gas consumption.

“The aim of reducing gas consumption is to save [it] ahead of winter in order to prepare for possible disruptions in gas supplies from Russia, which constantly uses energy carriers as a weapon,” the message on the Council of Europe website says. “Winter will be much cheaper and easier for EU citizens and industry,” said Czech Industry and Trade Minister Josef Sikela.

Gazprom announced the shutdown of another Nord Stream turbine Business

Just the day before, Gazprom announced that from July 27 it was forced to once again cut gas supplies via one of the main routes, Nord Stream, by half, from 67 million to 33 million cubic meters. m per day. After that, the exchange price of gas on the ICE Futures site for the first time since March exceeded $2,200 per 1,000 cubic meters. m, the cost of the August futures at the TTF hub in the Netherlands increased by 21%, reaching €214 per 1 MWh ($2,239.6 per 1,000 cubic meters).

The agreement of the EU countries provides for the possibility of declaring an "Allied alert" in case of a serious threat to the stability of supplies, in which case a consumption limit of 15% will become mandatory. “We must be prepared for a possible cessation of supplies from Russia at any moment,” said EU Energy Commissioner Kadri Simson.

To what extent does the European Union depend on supplies from Russia?

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Until the end of 2021, Gazprom, which is a monopoly in the EXPORT of pipeline gas from Russia, was its largest supplier to Europe. The company accounted for 40–45% of imports and about 35% of total gas consumption in the European Union. Slightly more (36%) were only European gas producers.

But the level of dependence on Russian gas among EU members varied greatly, according to a study by Wood & Co. Thus, in the countries of Eastern Europe and Finland it was 50-90% and higher, in Germany - less than 50%. However, unless supplies from other gas producers increase significantly, or Europe does not drastically reduce gas consumption in its energy mix, even countries with low dependence on Russian gas will experience problems, the authors of the study warn.

If gas supplies from Russia are reduced, the countries of Eastern Europe will have to look for alternative suppliers (Norway, the usa , Qatar, the countries of North Africa and Nigeria). But these producers have traditionally supplied gas to other European countries such as the UK and Spain. As a result, they may face gas shortages for their markets, according to a study by Wood & Co.

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How Gazprom supplied gas to Europe

In 2021, Gazprom's exports to non-CIS countries amounted to 185.1 billion cubic meters. m, of which about 155 billion cubic meters. m - to the European Union and Turkey.

In the EU, gas was supplied via three main routes - along the Nord Stream (59.2 billion cubic meters), running along the bottom of the Baltic Sea from Russia to Germany, through Ukraine (about 40 billion cubic meters) and the Yamal-Europe gas pipeline "(30 billion cubic meters), passing through Belarus and Poland. Another 27 billion cubic meters. m was delivered to Turkey through two pipes - Blue Stream and Turkish Stream.

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In the second half of 2021, the Russian company reduced supplies through Yamal-Europe, and at the end of April 2022, it became known that supplies through this pipe had been stopped after Russia demanded that “unfriendly” countries pay for gas in rubles instead of dollars and euros . Poland and Bulgaria were the first to disagree with this demand, and on May 11 Moscow imposed blocking sanctions on EuRoPol GAZ, the owner of the Polish Yamal-Europe section. They forbid Gazprom to use this gas pipeline.

Ukraine announced force majeure with the transit of up to a third of Russian gas to Europe Business

Around the same time, Ukraine announced a force majeure with the transit of Russian gas through one of the two main gas distribution stations "Sokhravovka" in the Luhansk region, over which it lost control during the hostilities. As a result, it was forced to stop about a third of transit (32.6 million cubic meters out of 100 million cubic meters per day) through its territory from Russia to Europe. Now Gazprom supplies only about 40 million cubic meters. m per day through the second Ukrainian gas distribution station "Sudzha".

In June, problems arose with Nord Stream: on June 14, the company reduced supplies by 40%, from 167 million to 100 million cubic meters. m per day, due to a delay in the repair of the Siemens turbine, and the next day announced the need to reduce them by an additional 20% (to 67 million cubic meters) due to the forced shutdown of another Siemens gas turbine engine. From July 27, pumping through this pipe will drop to 33 million cubic meters. m (or up to 20% of its design capacity) for a similar reason. Thus, deliveries along these three main European routes will be reduced by almost five times - from 129 billion to 27 billion cubic meters. m per year.

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How Europe was affected by the decline in supplies

Gas imports to the EU in the first quarter of 2022 increased by 10% compared to the same period in 2021, or by 8.4 billion cubic meters. m, up to 88 billion cubic meters. m of gas, according to the materials of the European Commission. At the same time, Russian gas supplies decreased by 31%, its share in total EU imports fell to 28%, and for the first time it yielded to liquefied natural gas (LNG) producers, which occupied 34% of imports.

Imports of Russian gas fell sharply through the territory of Belarus (Yamal-Europe) and Ukraine - on an annualized basis by 71 and 41%, respectively. At the same time, it decreased insignificantly (by 4%) via Nord Stream, which made this route the main one for deliveries to Europe (57% of all Russian exports).

EU plans to increase LNG supplies from Nigeria Business

According to the European Commission, in January-May, the EU received 41 billion cubic meters. m of gas through pipelines from Russia, another 10 billion cubic meters. m - in the form of LNG. As a result, the total volume of Russian imports decreased by 18 billion cubic meters. m, or 26%. “This points to the possibility of a significant reduction in Russian gas imports to the EU in 2022, given recent statements from Russia,” her report says.

In January-March, European countries spent €78 billion on gas purchases (of which €27 billion were in Russia), which is €16 billion more than in the first quarter of 2021, due to rising prices and volumes.

How to replace Russian gas

In the first quarter of 2022, EU LNG imports increased by 72% to 30 bcm. m, follows from the data of the European Commission. At the beginning of the year, prices at European gas hubs rose faster than in Asia, and raw materials were sold at a premium, which gave a strong incentive to send liquefied gas to Europe. In January-March, France was the largest LNG importer in the EU - it purchased 8.7 billion cubic meters. m, ahead of Spain (7.4 billion cubic meters) and the Netherlands (3.3 billion cubic meters).

The United States became the main supplier of LNG to Europe by a wide margin, providing 14 billion cubic meters. m (47% of total imports of liquefied gas). They are followed by Russia (5.5 billion cubic meters) and Nigeria (3.1 billion cubic meters). The EU accounted for 45% of all US LNG exports. European countries have become the largest importers of LNG in the world, ahead of its traditional buyers - Japan and CHINA .

In addition, in the first quarter of 2022, gas supplies from Norway to the EU increased by 5% (22% of imports from outside the EU). But own production in the member countries of the union decreased by 9%, to 12.8 billion cubic meters. m.

Ukraine will ask the US for "gas lend-lease" Politics

However, the European Union will not be able to completely quickly replace Russian gas, the European Commission admits. “Today it is impossible to replace the entire volume of Russian gas with non-Russian gas, so it is necessary not only to look for more gas, but also to start saving it,” said European Commissioner Virginijus Sinkevičius. In January-March, gas consumption in the EU has already decreased by 8% (11.6 billion cubic meters) compared to the same period last year, amounting to 130 billion cubic meters. m. Rising gas prices led to a decrease in demand in energy-intensive sectors (industry), and milder weather during the heating season than usual - to reduce demand in the residential sector.

According to Gazprom, in the first half of 2022, gas consumption by EU countries decreased by 27 billion cubic meters. m, becoming a key factor in reducing its global consumption. But not all members of the union are ready for such cuts. The EU decision to reduce gas consumption by 15%, adopted on July 26, provides for exceptions. In particular, EU countries that are not connected to the gas networks of other countries are exempted from this requirement. In addition, they may request easing if they have exceeded filling targets for underground gas storage facilities, or if their critical industries are heavily dependent on gas.

Where Gazprom can send gas

In the event of a complete cessation of supplies to the EU, Gazprom will have to reduce production by about 100 billion cubic meters in the short term. m per year (due to a drop in exports by 150 billion cubic meters), and the remaining volumes to sell to "friendly" countries or relatively neutral countries, the circle of which is very limited, such as Turkey and Hungary, says a leading oil and gas analyst at Wood & Co Ildar Davletshin.

According to him, Turkey is becoming a major gas hub and has the potential to further increase purchases of Russian gas. In the first quarter they grew by 34%. In the future, Gazprom needs to build a new gas pipeline to China (Power of Siberia-2, which should start from the fields from where supplies went to the West) and try to develop LNG production, Davletshin points out. The need to develop the production of liquefied natural gas was announced on Tuesday by Prime Minister Mikhail Mishustin at the government's strategic session on energy. According to him, it is necessary to develop LNG production in order to "increase the mobility of our resources, facilitate access to new markets."

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In the first half of 2022, Gazprom, according to preliminary data, reduced production by 8.6% (by 22.4 billion cubic meters), to 238.4 billion cubic meters. m of gas, the press service of the company said. According to the International Energy Agency (IEA), the total loss of gas production in Russia in 2022–2025 could amount to more than 480 billion cubic meters. m against the backdrop of sanctions and the EU decision to phase out Russian fuel. In the event of an accelerated refusal of European countries from Russian gas, production losses could reach about 550 billion cubic meters. m for this period. “E&P developments in Western Siberia and the Yamal Peninsula are expected to be hardest hit, while production prospects in Eastern Siberia are more resilient,” the IEA said in a quarterly report.

Technologically, it is not so difficult for Gazprom to reduce production: the company has “old” fields of the Nady-Pur-Tazovskaya group and, conversely, new ones - Bovanenkovskoye, Zapolyarnoye, etc., this reduction can be distributed between them, Davletshin believes. But deliveries to Europe accounted for up to 40% of Gazprom's profits, and at current prices - more than 50%, so the company's financial situation will become more complicated if Russia completely stops deliveries, he warns. Nevertheless, Gazprom dominates the Russian market and without Europe will not lose the bulk of its income, the expert says.

RBC sent a request to a representative of Gazprom about whether the company is considering the scenario of a complete cessation of supplies to the EU and how it is preparing for it.