Analysis of Russia’s access to the EU Gas Supply

In the event that Russia’s gas supply to the EU is cut off, what alternatives will European policymakers have at their disposal, other than blackouts and energy conservation?

There are several options still available, but the main ones are: 1) using existing gas storage volumes, which however will threaten winter volumes; 2) going to the market and bidding for available volumes; 3) increasing coal and nuclear power. The latter two options are however under severe pressure, as water levels in most rivers in Europe are at present at very low levels, and looking to be even lower very soon. Transport of coal to Germany and others could be hampered in the coming weeks. The main policy recommendations at present are to use a stringent reduction of gas usage by consumers and industry. At the same time, there is another option available: reopening the Dutch Groningen field and supplying additional volumes, even if this causes major political infighting.

In addition to buying an expensive 15 bcm of LNG from the US, several European countries can leverage or are leveraging other gas supply options and Europe’s interlinked gas network to share supplies. Germany can import gas from Britain, Denmark, Norway & Netherlands via pipelines. Norway’s Equinor can increase gas production from its Norwegian fields. Southern Europe can receive Azeri pipeline gas via TAP to Italy & TANAP through Turkey. Poland is looking to reinstate gas flow per the Yamal contract. Others can import electricity via interconnectors from neighbors and boost power generation from nuclear, hydropower, and coal, and later by biomethane and hydrogen. New wind and solar projects could replace 20 bcm of gas dd in 2022, 60 bcm by 2030. Germany, which has no LNG import terminals, is bringing in four floating terminals.

The first option is to secure short-term LNG imports – this has to be coordinated by both LNG exporters and importers, such as Qatar, Japan, China and others. The US may assist the EU in this case too. The EU basically needs to survive for a while, by receiving some LNG. In this case, the EU will have to promise some concessions to the countries involved (e.g. they can promise China ratification of the EU-China Investment Deal). Second, some countries including Germany may temporarily use coal and other alternatives. Third, they can convince gas exporters to increase their exports. The recent MoU signed between the EU and Azerbaijan can be viewed from that perspective. Moreover, urgent talks can be carried out with Algeria, Norway and other gas exporters to convince them to transit more gas to the EU market.