Gas crisis set to worsen after Europe burns through winter stocks

  • European gas storage about 90% full
  • Gazprom resumes exports to Italy
  • The Kremlin wants to join the investigation into Nord Stream leaks
  • EU split over gas price cap proposals

HELSINKI/BRUSSELS, Oct 5 (Reuters) – Europe could face an even more acute energy crisis next year after draining its natural gas tanks to weather this winter’s cold, the head of the International Energy Agency said on Wednesday, like the EU is looking for ways to defuse the crisis.

European countries have filled storage tanks to about 90% of capacity after Russia halted gas supplies in response to Western sanctions over its invasion of Ukraine.

Gas prices, which had risen sharply in the months following the February invasion, have fallen. That could be short-lived, however, as countries compete to buy liquefied natural gas (LNG) and other alternatives to Russian pipeline supplies.

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To ease the pain, the European Union is considering a gas price cap, an issue that has divided the 27-nation bloc as some countries fear it could make securing supplies more difficult.

“With almost 90 percent gas storage, Europe will come through the coming winter with some bruises, barring any political or technical surprises,” said Fatih Birol, executive director of the Paris-based IEA.

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The real challenges for Europe, which has historically relied on Russia for about 40% of its natural gas, will begin in February or March, when stores need to be refilled after high winter demand has drained them to 25% to 30% .

“This winter is difficult, but next winter could also be very difficult,” Birol told journalists in Finland.

European governments have been scrambling to protect consumers from the impact of higher prices, and on Wednesday Germany announced it will subsidize electricity bills next year by offering just under 13 billion euros ($12.8 billion). pays the usage fees charged by the four high-voltage transmission grid companies (TSOs).

The charges are part of the electricity bill and account for around 10% of the total cost for residential customers and a third for industrial companies in sectors such as steel or chemicals.

Berlin’s intervention is stabilizing fees, which would otherwise have tripled in the face of galloping wholesale electricity prices and rising operating costs for transmission system operators, said German Economics Minister Robert Habeck.

Until the outbreak of the Ukraine war at the end of February, the Nord Stream 1 pipeline under the Baltic Sea from Russia to Germany was one of the most important gas sources in Western Europe.

Nord Stream 1 consists of two separate pipelines, as does Nord Stream 2, which was filled with gas but was never allowed to deliver supplies to Europe because Germany suspended permits just before Russia invaded Ukraine on February 24.

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Three of the four lines were disabled by sabotage that the West and Russia said caused huge leaks, and Danish authorities said the fourth would be depressurized on Tuesday.

SABOTAGE?

President Vladimir Putin on Friday blamed the United States and its allies, allegations that Washington denied. Russia has condemned “stupid” theories in the West that it blasted the pipelines itself last week.

The Kremlin on Wednesday said Russia must be part of the investigation into the incidents, while one of Putin’s allies said he recalled the US intelligence agency-backed attacks on Nicaragua’s oil infrastructure in 1983.

For her part, European Commission chief Ursula von der Leyen said EU countries must step up protection of their critical infrastructure by conducting stress tests and using satellite monitoring to detect potential threats.

She was speaking in the European Parliament ahead of a meeting of EU-27 leaders on Friday in Prague where they will debate the EU’s price cap plan.

The details have yet to be worked out, but the idea has the support of a majority of countries, who see it as a way of dealing with inflation. However, it has met opposition from Germany, Denmark and the Netherlands, who have raised concerns it will make securing supplies more difficult.

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Von der Leyen said in her speech that countries should also start buying gas together to avoid EU member states bidding against each other in world markets and driving prices even higher.

Earlier tensions in the gas market had eased when Russian energy group Gazprom (GAZP.MM) resumed gas exports via Austria to Italy on Wednesday after resolving an issue with guarantees that caused supplies to be suspended over the weekend.

European leaders and Moscow say they cannot rule out sabotage. Map of the Nord Stream pipelines and locations of reported leaks

However, Deputy Prime Minister Alexander Novak said on Wednesday that Russia could potentially cut oil production to offset the negative impact of price caps imposed by the West over Moscow’s crackdown on Ukraine.

The price cap plan agreed by the Group of Wealthy Seven Nations requires participating countries to refuse insurance, finance, brokerage, navigation and other services for oil cargoes priced above a yet-to-be-determined price cap for crude oil and oil products.

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Reporting by Reuters bureaus; writing from Barbara Lewis and Alexander Smith; Edited by Edmund Blair, Jane Merriman and Emelia Sithole-Matarise

Our standards: The Thomson Reuters Trust Principles.

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