Gas crisis in Europe: can LNG contribute to strengthening energy security? | Business | Economic and financial news from a German perspective | DW

The true scale of Europe’s energy crisis hit home this week when Commerzbank released data showing the current stockpile of natural gas in the European Union.

Storage facilities in EU countries are less than half full – and that’s at the height of peak winter demand, according to Germany’s second-largest lender.

“Current inventories are around 47% of full capacity,” Bernd Weidensteiner, senior economist at Commerzbank in Frankfurt, told DW. “Normal for this time of year is around 60%…so we’re significantly lower.”

Indeed, a Commerzbank chart posted on Twitter shows that in previous years EU stocks have ranged from 60% to over 85% in January.

Europe was already in the grip of an energy crisis when Russia’s state-controlled Gazprom cut deliveries of natural gas to the bloc in October, driving up prices even further.

Moscow, which supplies about 40% of the gas imported from Europe, is accused of using its energy exports as leverage in a dispute over Ukraine, through which a large part of Russian gas passes.

The West believes Russia is planning a full-scale invasion of Ukraine, after the Kremlin mustered more than 100,000 troops on its border with the Eastern European country over the past two months.

Europe’s energy security under threat

Just as German and US diplomats have warned Russian President Vladimir Putin of an escalation in the crisis, leaders on both sides of the Atlantic are increasingly worried about Europe’s energy security vulnerability. .

If Putin were to cut natural gas supplies during a military conflict or in retaliation for future Western sanctions, Weidensteiner warned that “some [European] stocks could be extremely low.”

To help reduce the demand for gas to heat and power homes and businesses, last month around 10 shipments of liquefied natural gas (LNG) destined for Asia were diverted to Europe.

Could LNG fill the void?

The move has reignited debate over whether LNG could be a more permanent solution to Europe’s energy dependence on Russia.

LNG is natural gas cooled to a liquid state and shrunk to 1/600th of its original volume. The liquid is often exported in huge ships containing heavily insulated tanks that keep the gas in a liquid state at around -162 degrees Celsius. At the other end, the liquid is transformed back into gas (regasified).

The United States has long warned of the threat posed by Russia’s dominance in the natural gas sector, in part to boost its LNG exports to Europe. Thanks to the shale gas boom of the past decade, the United States is now the world’s largest exporter of LNG.

But, as U.S. energy companies increase their LNG export capacity by nearly 20%, to 13.9 billion cubic feet per day by the end of the year, according to the International Energy Agency energy, the new supply will not be enough to bail out Europe. if Putin closes the taps.

LNG exporters need time

In the short term, “LNG would not be able to fully compensate [for any natural gas shortfall from Russia]“, said Weidensteiner, citing “a lack of short-term free capacity among exporters like the United States and Qatar”.

The Commerzbank economist said that although Europe still has the capacity to process or regasify imported liquid gas, “it would be difficult to deliver it to end users because the distribution infrastructure is not suitable to a significant shift to LNG”.

In another sign of Europe’s energy vulnerability, the US government recently held talks with several international energy companies to discuss contingency plans to deliver gas to Europe if Russian supplies were cut off, it reported on Saturday. the Reuters news agency.

Citing two US officials and industry sources, Reuters said US State Department officials had approached the companies to ask where additional supplies could come from if needed.

With tight global supplies at present, officials have been told there is little gas available to replace large volumes from Russia, industry sources said.

If other natural gas or LNG exporters don’t step in, Europe could struggle to make up for any temporary shortages of Russian supply in the worst-case scenario, Weidensteiner warned.

Fall back on coal?

“You can speed up coal-fired power plants instead, but environmentalists won’t like that,” Weidensteiner said. “But it’s really the only possibility in the short term.”

Nord Stream 2 was due to be completed in 2019, but the threat of US sanctions has delayed construction

Putin insisted that opening the new Nord Stream 2 gas pipeline from Russia to Germany would help ease the energy crisis in Europe.

The pipe, which runs under the Baltic Sea, was completed late last year but has yet to receive its operating license from Germany. While the German government blamed a few last-minute regulatory hurdles for the delay, the Ukraine crisis put pressure on Berlin to delay clearance.

Nord Stream 2 faces resistance from the United States and several European countries, including Poland and Ukraine, who say it will further increase Russia’s influence on the continent and reduce transit fees collected by Ukraine for gas to flow through existing pipelines.

Weidensteiner insisted that an easing of the crisis did not depend on the opening of Nord Stream 2.

“Russia has the ability to deliver more gas through existing pipelines if it wishes,” Weidensteiner said. “It could have something to do with the game Mr. Putin is playing. It could also have something to do with supply problems in Russian gas fields. But it’s not clear.”

Edited by: Hardy Graupner

Comments are closed.