EU announces plan to cut Russian gas imports by two-thirds this year
Europe is rushing to find alternatives to Russian gas, a move that’s become more urgent as Moscow threatens to cut off supplies from the key Nord Stream 1 pipeline.
The European Union reckons it can cut its import needs from Russia by about two-thirds this year, by tapping new supplies, boosting energy efficiency and using more renewables. But doing that won’t be easy.
The region bought more than 150 billion cubic meters of Russian gas last year—about a third of its needs—and it will be a tough task to replace most of that volume in the short term. Even with Russian gas still flowing, European prices have surged and are equal to about $400 a barrel of oil.
Here’s a look at Europe’s alternatives to Russian gas:
Output in the EU and piped imports from countries such as Norway and Azerbaijan could climb as much as 10 billion cubic meters over the next year, according to the International Energy Agency. That includes lighter summer maintenance in the North Sea. European producers also have some startups planned for this year, and Norway’s Melkoya plant is set to return in May.
But European volumes can only expand so much. Norwegian officials have said the country is already pumping close to capacity, while U.K. fields are stretched following a ramp-up in production in the second half of last year.
Azerbaijan aims to boost shipments to Europe by about 11% to 9.1 billion cubic meters this year and then to 11 billion cubic meters in 2023, an energy ministry official told the Asia Times. Spain has said that Algeria is also ready to send more gas if needed, and the Spanish gas network operator said it’s working with Algeria on the planned expansion of the Medgaz pipeline’s capacity to 10.7 billion cubic meters a year from 8 billion.
Those plans could be challenged by the fact that most of Azerbaijan’s exports are already tied to long-term contracts with buyers. Algeria now burns more gas than it exports following a boom in domestic demand over the past decade, and what’s left is mainly contracted in long-term deals signed years ago.
The IEA says the EU has a greater potential to ramp up liquefied natural gas imports, given its spare regasification capacity, and the bloc said as much as 50 billion cubic meters a year will come from new LNG sources. Regions such as the U.S., Middle East and North Africa already send supplies.
Qatar has also said it wants to meet EU requests for extra supply and that about 10% to 15% of its LNG contracts— most of which are with Asian countries—can be diverted elsewhere.
Still, most Qatari exports are already accounted for in long-term contracts, and diverting sales would need EU importers to cut a deal with contracted buyers who may want to keep cargoes for themselves. Seeking more LNG means the EU must compete for cargoes with other regions including Asia, with deliveries going to the highest-priced market.
Plus, while the U.S. has been the top LNG supplier to Europe since the start of the year, its export plants are running at full tilt. U.S. capacity expansions also won’t plug an immediate supply gap.
“For European countries wanting alternatives to Russian gas, the U.S. is an obvious place to find suppliers,” consultant Wood Mackenzie Ltd. said in a note. But it will only make a “significant contribution” in a few years’ time, it said.
—With assistance from Lars Erik Taraldsen, Thomas Gualtieri, Verity Ratcliffe and Ewa Krukowska.
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