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| After the extraordinary military campaign in Ukraine, the amount of gas Europe imported from Russia has dropped by two-thirds compared to its peak in 2019. (Source: Sempra Infrastructure) |
Europe is entering its second winter since Russia cut off most of its gas pipelines to the region. By the end of this summer, European gas storage facilities were 90% full, two months ahead of schedule.
Still, observers warn, the energy crisis is far from over. Europe has significantly reduced its dependence on Russian gas, but the region remains exposed to price shocks on global markets.
For more than a decade, Russian pipelines have provided Europe’s largest source of gas. After the extraordinary military campaign in Ukraine, the European Union’s (EU) gas imports from Moscow have fallen by two-thirds from their peak in 2019. Instead, Norway has become the region’s largest gas supplier.
The US is also benefiting from Europe’s energy shift. In 2022, liquefied natural gas (LNG) from the US to Europe will reach nearly 64 billion cubic metres, up from zero in 2015.
EU governments expect the gas to continue to flow to the region. Spain, the UK and France currently have the largest number of LNG import terminals, accounting for 60% of the continent’s capacity. However, according to S&P Global, European countries are still struggling to find alternatives to Russian gas.
Here's how some European countries are preparing for a second winter without Russian gas.
Older brother
UK households will be hoping for a "mild" winter this year, especially since the government ended its energy bill support scheme.
In the past, the UK imported just 2% of its gas from Russia. Instead, the country relied on pipeline imports from Norway and LNG from suppliers around the world. Last year, the UK imported a record 25.6 billion cubic metres of LNG, accounting for nearly 45% of the country's total gas needs.
Britain is expected to continue to be affected by rising global gas prices this year, with its gas storage facilities among the smallest in Europe.
Unlike other European countries, Britain has struggled to reduce its gas consumption at a national level. Last year, the government addressed the energy crisis by subsidising household energy bills in the short term, while encouraging investment in domestic energy sources in the long term.
Analysts worry that the government is counting on mild weather and abundant LNG supplies in the global market to get through this winter.
Virtue
Immediately after the Russia-Ukraine conflict broke out, Europe's largest economy quickly laid out plans to cut its dependence on Moscow's fuel.
The plan includes requiring the country's vast gas storage facilities to be 65% full in August, 80% in October and 90% in November.
Germany differs from other EU countries in its commitment to energy efficiency. The country has set a target of reducing its gas use by 20% – supported by a range of policy measures such as mandatory heating maintenance and upgrades for homes and owners of large buildings.
The effort appears to have paid off: Germany used nearly 15% less natural gas last year.
While the Berlin government is trying to reduce gas demand, the country is also increasing its LNG imports. Germany has increased gas imports from the Netherlands and Norway, developed three new LNG import terminals and negotiated contracts with suppliers in the US, Qatar and the United Arab Emirates (UAE).
Germany hopes to have three more LNG import terminals operational by January 2024.
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| In 2022, liquefied natural gas (LNG) from the US to Europe will reach nearly 64 billion m³, up from zero in 2015. (Source: istock) |
France
France imported only 17% of its gas from Russia before the special military operation, so it is less dependent on the Kremlin than some of its European neighbors.
However, the disruption to gas flows - albeit small - from Russia comes amid serious problems at France's nuclear plants, raising concerns that the country could face power outages in winter.
To prevent this, the government has introduced a series of measures to reduce the country's energy use by 10% compared to 2019 next year and by 40% by 2030. These include a campaign to encourage households and businesses to turn on heating two weeks later than last year and only when the indoor temperature drops below 19 degrees Celsius.
The government also plans to increase gas storage levels and install a new LNG import terminal in the Normandy city of Le Havre.
Spain
Spain is not dependent on Russian energy supplies thanks to its chain of gas import terminals. However, the country is taking steps to secure energy supplies during the winter and is aiming to reduce gas demand by 21% between August 2022 and March this year.
Specifically, Spain has implemented mandatory energy-saving measures such as limiting heating in public buildings to no higher than 19 degrees Celsius and air conditioning to no lower than 27 degrees Celsius. Shops and restaurants also "join hands" to save energy, turning off lights after 10 p.m.
Last year, to help Spanish households pay their energy bills, the government cut VAT on gas from 21% to 5%.
In addition, the EU approved an €8.4 billion plan by Spain and Portugal to reduce wholesale electricity prices in the Iberian market by capping the price of gas used to generate electricity.
Thanks to its energy infrastructure, Spain can export electricity to neighboring countries. In the summer of 2022, this exported electricity covered 30% of demand in Portugal and 4.5% in France. Gas exports increased by 55% in the first three months of 2023 thanks to LNG tankers and the expansion of the gas pipeline to France.
A plant capable of shipping 100 LNG ships a year across Europe has also opened at the port of Gijón, in northwestern Spain.
Poland
In April 2022, when the Kremlin began demanding payment in rubles for gas, Poland and Bulgaria were the first to object and were cut off. At the time, nearly half of Poland’s gas was transported via the Yamal pipeline from Siberia. But unlike Germany, which relies on gas for about 15% of its electricity, Poland generates most of its energy from coal.
For years, the largest economy in Central and Eastern Europe has been trying to reduce its dependence on Russian gas. After the Special Operations, Poland accelerated imports through LNG terminals. Earlier this year, state-owned oil company Orlen finalized a 20-year deal with Sempra (USA) to import 1 million tons of LNG per year.
According to The Guardian , last month, gas prices spiked more than 40% in just one day due to news of strike action by workers at a gas project in Australia.
Australia doesn’t supply much gas to Europe, but experts warn that the northern hemisphere could still face some risks in the gas market this year. It’s a stark reminder that the best way to hedge against rising gas prices is to cut back on consumption.
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