The European Union has urged nations to prepare for natural gas rationing amid mounting concerns that Russia will continue to pressure supplies to the continent.
The European Commission, the EU’s executive arm, released a plan on Wednesday urging governments to prepare for a winter without adequate Russian gas supplies. That scenario became clear this week as capital cities across Europe waited for Moscow to restart Nord Stream, a key pipeline carrying gas from Russia to Europe, after a scheduled maintenance period due to end on Thursday. Europeans are nervous because Moscow had already reduced gas flow through Nord Stream to about 40% of its capacity before the maintenance period began.
“We need to prepare for a possible total shutdown of Russian gas,” European Commission President Ursula von der Leyen said at a news conference on Wednesday. Although the EU doesn’t know what Moscow will do, it said: “This is a likely scenario.”
Russian President Vladimir Putin said late Tuesday that his country would meet its commitments to supply natural gas to Europe, but also warned of possible new capacity shortages due to Western sanctions.
Under the Commission’s plan, EU countries will voluntarily cut their gas consumption by 15% over the next eight months and set priorities to determine which industrial sectors would be hit hardest. Under a proposal presented on Wednesday, the commission said energy savings targets could become binding if voluntary measures are not enough to prevent a shortage.
As Europe struggles to wean itself off Russian energy, American natural gas producers are struggling to meet demand and prices are rising. Factors such as extreme weather and equipment needs created a shortage during the war in Ukraine. Illustration: Laura Kammermann and Sharon Shi
The plan also encourages switching from natural gas to alternative sources of energy, including nuclear and coal, setting up auctions that could compensate companies for using less gas, and setting mandatory limits on heating and air conditions in public buildings. The plan lays out criteria that governments can use to determine which industries to prioritize when there isn’t enough gas.
Even if Nord Stream comes back online, European officials and industry leaders are concerned Moscow may decide to further restrict gas flow.
Europe got about 40% of its total natural gas consumption from Russia last year, and officials are struggling to replace that volume with a spate of deals from alternative suppliers. The bloc is also working to accelerate renewable energy projects and wants to encourage consumers to reduce their overall energy needs.
The commission said Wednesday that Russian gas shipments to Europe in June were less than 30% of the average the bloc had received over the past five years.
If Russia continues to limit or halt supplies altogether, countries would struggle to fill their storage tanks ahead of winter, increasing the risk of shortages during the winter heating season. The International Energy Agency said this week that Europe is now operating “in a constant state of uncertainty over Russian gas supplies,” including the possibility of a full shutdown.
In its proposal, the Commission said countries are expected to make every effort to reduce their natural gas consumption by at least 15% between 1 August and 31 March 2023 compared to their average consumption in previous years.
If voluntary efforts are not enough, the Commission, after consulting bloc member states, could set a binding target to reduce energy consumption.
Governments are expected to update their existing national emergency plans by the end of September with details on how they will reduce consumption, the commission said. Officials said the proposed 15% reduction is equivalent to about 45 billion cubic meters of natural gas and should be enough to see Europe through the winter in the event of a full Russian gas disruption.
The metals sector is one of many in Europe that would be severely affected by a halt to Russian gas imports.
Photo: Sascha Schuermann/Getty Images
Europe’s energy-intensive industries – including steel, aluminium, glass and chemicals – have lobbied the Commission in recent weeks for priority access in the event of significant gas shortages.
Existing rules for dealing with energy supply shortages state that while certain consumers such as households and hospitals should be protected from rationing, industrial users could face forced cuts.
The commission on Wednesday released a set of criteria as part of its plan aimed at helping European governments determine which industries will get priority access to limited supplies.
The EU’s guidelines state that governments should assess whether an industry is critical to the health and safety of society, whether it could switch to other fuels or become more efficient, and how the closure of a particular industry or manufacturer would affect the economy Supply chains could impact block. Governments should also assess whether a sudden loss of gas could cause irreparable damage to industrial facilities, the document said.
Some industrial facilities, such as aluminum smelters and glass furnaces, are designed to operate continuously and could suffer significant damage if they suddenly lose access to energy sources. Other industries, including chemical producers, have stressed their importance to downstream manufacturers.
A shutdown of chemical production in Europe would have “a domino effect on all other sectors that rely on chemicals and would jeopardize their ability to supply their customers with sufficient goods,” said a spokeswoman for the European chemical industry association Cefic.
The Commission’s plan calls on governments to support efforts to switch to alternative energy sources. Renewable energy sources should be given priority, but nuclear power and coal could also replace some of the natural gas demand.
The plant of fertilizer giant Yara in Le Havre, western France.
Photo: sameer al-doumy/Agence France-Presse/Getty Images
Another recommendation of the plan is that governments set up auctions where industry can offer to reduce its gas consumption in return for compensation. Some industry leaders have said they support the idea because it would allow them to determine when it makes financial sense to stop or reduce their consumption.
Svein Tore Holsether, chief executive of fertilizer maker Yara International AS A, said in an interview earlier this month that the company would consider participating in auctions and has some flexibility to reduce its natural gas consumption by importing more ammonia, which it had to produce fertilizer.
“If that makes sense for both the EU and us to minimize natural gas consumption and maximize ammonia imports, then of course we will discuss and investigate that,” he said.
Yara said on Tuesday it had decided to cut some of its European production due to lower demand in the northern hemisphere and soaring European gas prices. The cuts total about 27% of the company’s ammonia capacity and about 18% of its finished fertilizer capacity in Europe, a company spokeswoman said.
Some companies may also respond to the auction system by bringing forward their scheduled maintenance or renovations so they can reduce their gas use and potentially receive compensation, industry officials said.
The federal government has announced that it will set up a gas auction system this summer.
write to Kim Mackrael at [email protected]
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