Earlier this month, Russian gas giant Gazprom said gas flow through the Nord Stream 1 pipeline would need to be stopped for further maintenance. The fear this announcement has sparked in European capitals, even as gas storage is filling up earlier than expected, speaks volumes about Europe’s predicament: there is no quick fix to dependence on Russian gas.
As Germany prepares for the suspension of gas flows tomorrow, in Bulgaria, the EU’s poorest member, a few hundred people have been protest every day against the return of the Russian company as the country’s leading gas supplier.
This return, according to the interim government currently in charge of Bulgaria, is inevitable because there are simply no alternative suppliers. According to the protesters, American LNG and Azeri gas can replace the Russian gas pipeline.
According to available data on LNG demand in Europe, as cited by government officials, the country would have to wait months for another LNG shipment, as every available import terminal slot nearby has already been booked. And the interconnection supposed to transport Azeri gas via Greece is not yet operational. Meanwhile, storage levels are extremely low.
Bulgaria was, some said, a test case for Gazprom to see how many European buyers would refuse to pay in roubles. They all did – initially. Now, according to the instructions of the European Commission, payment is made according to Russian terms, but documented as made at the time the buyer sends the payment in euros or dollars to Gazprombank, which then converts the amount into rubles and transfers them at Gazprom.
This alone shows that Europe remains dependent on Russian gas and that severe supply disruptions would likely lead to chaos, eventually. The road there is paved with record electricity prices.
Day-ahead electricity prices in Europe for Monday were close to 660 euros per MWh in Germany and more than 730 euros in France, according to Bloomberg. Javier Blas. The lowest price in the region was in Turkey, at just over 182 euros per MWh. Two years ago, Blas noted, the typical electricity price in Europe was no more than 50 euros per MWh.
Then there was the case of The Hague, the Dutch city where the human rights tribunal sits, which this month asked the European Union for a temporary exemption from anti-Russian sanctions because it had not found another gas supplier in time. The Hague, according to its authorities, had held a tender for gas suppliers in July, but no bidders had come forward.
Efforts to further reduce Russian gas consumption continue, however, and the filling rate of storage caverns is a sign of success in this regard, some, because this faster rate of filling storage comes at a price 10 times higher. than what Europe normally pays to fill its gas caverns for the winter.
According to a editorial in Politico, in the long run, Europe is in a strong position as it would continue to diversify its gas import sources while Russia would struggle to diversify its customers as it has a much larger pipeline network modest in the East.
Politico editorial writers say it will give leverage to Europe; However, it remains to be seen who Europe would use this leverage on, as there are plans to stop buying Russian gas altogether by 2030 or earlier.
Yet there will also be a price to pay for this: not one but several winters of energy shortages, according to the energy minister of Belgium and general director from Shell. We can hope that Bulgaria and Greece will then have finally put into service the famous interconnection intended to transport Azeri gas to the center of the Balkans.
By Irina Slav for Oilprice.com
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