Can Europe survive the winter without Russian gas? Experts weigh in

Over the past two years, Europe has rapidly distanced itself from Russian energy commodities in protest of Russia’s war in Ukraine. The European Union first placed an embargo on crude oil imports from Russia in December 2022, followed by an embargo on petroleum products (including gasoline and diesel) in February 2023.

Meanwhile, Russian natural gas imports have fallen from about 450 million cubic meters per day (mcm/d) at the end of 2021 to about 150 million cubic meters per day today.

The remaining gas flows are roughly split between LNG, pipeline flows through Ukraine and other pipeline routes (mainly flow through Turkey to Bulgaria, as well as a small flow through Belarus to Lithuania). Europe has now emerged from two gas-heavy winters, despite the dramatic reduction in Russian imports.

gas stores in Europe they were almost 60% full. until the end of the winter season in April 2024, a record for the end of the winter season.

At first glance, the feat seems impressive. However, it belies the fact that the continent has made little progress in cutting Russian supplies in nearly two years, despite calls from some nations to cut off Russian energy products entirely, even as the war in Ukraine shows no sign of slowing.

Indeed, energy commodity analysts at Standard Chartered reported that there had been no progress in reducing imports since flows through the Nord Stream pipeline system ceased. In contrast, Europe’s gas imports from Russia increased by ~50% from Q1-2023.

of Ukraine recent military force in Russia’s Kursk region raised market concerns about flows through Ukraine; however, StanChart deemed these fears overblown. In 2019, Russia and Ukraine signed a five-year pipeline transit agreement to supply natural gas to Europe. However, Kiev has signaled it will not renew the pact when it expires on December 31, 2024, while EU energy chief Kadri Simson has indicator that the EU executive has “no interest” in pushing for the deal’s revival.

Gas from Ukraine accounts for 5% of total EU gas imports, and Aura Sabadus, senior analyst at market intelligence firm ICIS, told Politico that Austria, Hungary and Slovakia are likely to be the hardest hit when imports are halted . StanChart, however, says there is enough capacity elsewhere to replace gas flows through Ukraine. Commodity analysts pointed out that non-Russian LNG flows to the EU have fallen by ~140 mcm/d since April, enough, if restored, to replace Russian LNG almost threefold. According to analysts, removing the last Russian molecules from the EU is more a matter of political will, something that some European nations seem to lack.

of StanChart feelings are largely corroborated by the findings of Bruegel, an economic think tank based in Belgium, but with some important caveats. Bruegel looked in depth at how the EU would fare if the flow of Russian gas to Europe were disrupted.

The main takeaway is that not only could the EU get through next winter without Russian gas, but it could do so without having to experience an economic catastrophe. However, for this to happen, Europe would have to overcome severe technical and regulatory challenges and also reduce its annual demand for natural gas by 10-15%, as no amount of imports from outside Russia would not have enough to sufficiently fill the warehouses before the next one. winter.

The first sanctions on Russian gas

Back in June, Sanctions approved by the EU on Russian gas, the first time it has done so since Russia invaded Ukraine. The EU will hit Russia with unprecedented sanctions against its lucrative gas sector – a move that could wipe hundreds of millions from Moscow’s war chest, according to the Belgian EU presidency.

The decision came after Germany and Hungary blocked an agreement for weeks, albeit on different parts of the package. As you might suspect, the sanctions will not affect most of Russia’s liquefied natural gas (LNG) exports to the EU; instead, the proposed sanctions would prevent EU countries from re-exporting Russian LNG after receiving it and would also ban EU involvement in future LNG projects in Russia. The sanctions will also ban the use of EU ports, finance and services to re-export Russian LNG, essentially meaning that Russia would have to overhaul its LNG export model. Russia currently supplies LNG to Asia via Europe, with Belgium, Spain and France being major hubs.

“If they cannot transship in Europe, they may have to take their ice tanks on longer journeys,” Laura Page, a gas expert at data analytics firm Kpler, told Politico, adding that Russia “they may not be able to get as many cargoes out of Yamal because their ships can’t return as quickly.”

Norway and the US have replaced Russia as Europe’s largest gas supplier: Last year, Norway supplied Europe with 87.8 billion cubic meters of gas, accounting for 30.3% of total imports, while the US supplied 56.2 billion cubic meters, representing 19.4% of the total. .

By Alex Kimani for Oilprice.com

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