July 11, 2022 [bne INTELLINEWS] – Russia turns off the Nord Steam 1 gas pipeline to Europe for its annual 10 days’ maintenance and no one is sure that it will be turned on again. If that’s it for gas deliveries this year, how many days of gas are currently in the storage tanks?
Europe is afraid that the Kremlin will spark a major energy crisis this winter by turning off its gas supplies completely. Gazprom reduced flows of gas to Europe by 60% in mid-June just as the tanks were half full.
The EU has set a target of having the tanks 80% full by the end of October and as bne IntelliNews reported, even at the reduced flow rates Europe should hit that target after the tanks reached 60% of capacity in the first week of July. Despite the reduction of gas from Russia, Europe is currently importing record amounts of LNG from the US that allow the gas in tank storage to continue growing.
But things are not quite that simple. Just getting to 80% full by the end of October is not enough gas to get through the whole heating season, which runs from October 1 to March 31, without continuous supplies of more gas during the winter.
Europe has large storage capacity, with the biggest facilities being in Germany and Ukraine. However, those facilities cannot hold enough to meet demand for the entire winter.
Storage levels and storage capacity vary greatly in the EU (chart). The tanks in Poland and Portugal are already close to 100% full. However, even the full tanks in Poland and Portugal are not enough to get through the whole winter. They hold enough gas for 79 days of consumption and 24 days respectively. That means without new supplies during the winter they would run out of gas by January 18 and November 24 respectively if all gas supplies were cut off from the current levels of gas stored.
Indeed, this is the case for all the countries of Europe; most countries’ storage doesn’t hold enough gas to last the whole winter. The exceptions are the Slovak Republic and Austria (chart), where their tanks do hold enough gas to get to the end of the heating season if full. Everyone else starts running out of gas as soon as October (assuming gas withdrawals start on October 1, but a mild winter means drawdowns can start as late as the start of November), although some survive until February. Czechia is in the third best position, as its tanks can last to April 5 if full.
But neither Poland nor Portugal will run out of gas even if Russia turns off the spigots. Poland will open a new pipeline to Norway on October 1 and is the first EU country to have entirely weaned itself off Russian gas supplies. Portugal’s supplies of gas are almost all LNG that is brought by ship under long-term contracts and also stands little chance of running out.
With the other countries much depends on their relations with Russia and the size of their tanks. Hungary’s storage tanks hold 133 days’ worth of gas, which means it would run out on March 13 if its tanks were full when Russia turned off supplies, but earlier this year it signed a new gas supply contract with Russia and has locked in supplies for this winter.
Germany remains the most exposed, as it is almost entirely dependent on Russian gas imports. Despite having by far the largest storage tanks in Europe, its demand for gas is equally large and its tanks only hold 108 days of consumption – full tanks would run dry on February 16 and they are currently only 60% full, which would be emptied on December 8 if Russia turned off the gas tomorrow.
The EU as a whole is in the same position with an average storage capacity of 98 days of consumption, so full tanks run dry on February 6, but as the tanks for the whole of the EU are also 60% full, if the gas were turned off tomorrow Europe would run out of gas on November 28 (assuming an October 1 start to winter).
And the country in the worst position is Ukraine, which also has huge storage tanks accounting for about 20% of Europe’s entire capacity, but those tanks are currently only 21% full. In the normal course of things Ukraine’s hold enough gas for 135 days of consumption, which takes it through to the middle of March, but the current amount of gas will run out on October 29 if deliveries are turned off tomorrow and at best the end of November if the autumn is mild. Ukraine is very likely to have an energy crisis this winter, as it has not imported gas from Russia for over three years and its European friends will be short of gas for themselves this winter.
So even if Europe gets to its 80% full tank target by October 1, it remains at Russia’s mercy, as it will still need to import gas during the winter from somewhere to cover the missing months, albeit at lower volumes than now.
It is not clear how much LNG can make up the shortfall, but in general LNG supplies can cover some 15% of Europe depend and there are also technical limits on how much LNG Europe can import due to the capacity of available LNG terminals in Europe. There are other sources of gas from production in Norway and the Netherlands, but it is not enough for everyone.
Depending on how aggressive Russia is and to what extent it reduces flows, the scenarios Europe may face could be extreme. Europe needs to cut its usage by 15%, according to study by Bruegel, if it is to get through the winter. In the more extreme scenarios, it would have to ration gas and order companies to reduce industrial production to make sure there was enough gas to heat homes.
Germany has already introduced the “alert” status, the second of the EU’s energy crisis warning system, while another 12 EU member states are on the first “early warning” state. German Vice-Chancellor Robert Habeck, in charge of the economy and energy, has ordered coal-fired power stations to be readied in case Germany runs out of gas. Germany uses the bulk of its gas for heating and only 15% is used for power generation, which can be replaced by coal-fired power plants.
With a 15% reduction in consumption and by making use of non-Russian sources of gas, plus the alternative power sources like nuclear and coal, Europe should be able to survive the upcoming winter, the think-tanks said. But it won’t be fun.
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