Factbox: Europe's Options in Case of Russian Gas Disruption

LONDON (Reuters) — European gas prices have soared as tensions escalate between Russia and the West after Moscow ordered troops into two breakaway regions in eastern Ukraine.

The United States and its European Union allies are set to announce fresh sanctions against Russia, which could affect the flow of Russian gas into Europe.

German Chancellor Olaf Scholz has put the certification of the Nord Stream 2 gas pipeline from Russia to Germany - which is designed to double the amount of gas flowing from Russia to Germany, bypassing Ukraine - on ice.

Where Else Can Europe Source Supply?

Europe relies on Russia for around 40% of its natural gas. Most comes through pipelines including Yamal-Europe, which crosses Belarus and Poland to Germany, Nord Stream 1, which goes directly to Germany, and via Ukraine.

Europe's gas markets are linked by a network of pipelines. Most countries have cut reliance on Russian gas over the years and there are also more supply routes that bypass Ukraine.

By last year Ukraine was a transit corridor largely for gas going into Slovakia, from where it continued to Austria and Italy.

The threat of sanctions if Russia invades Ukraine could impact flows through pipelines such as Yamal-Europe, Nord Stream 1 and TurkStream.

Sanctions have been threatened against Nord Stream 2 and Germany put on ice the certification of the pipeline on Tuesday. The European Commission said current European gas supply would not be affected since the pipeline is not yet operating.

Other possibilities are that Russia suspends sales of gas to Europe in retaliation for sanctions, or military conflict causes damage to one of the pipelines which cross Ukraine bringing gas to Europe, said analysts at the Oxford Institute for Energy Studies.

Some countries have other options. For example, Germany, the biggest consumer of Russian gas, can also import from Norway, the Netherlands, Britain and Denmark via pipelines.

But Norway, Europe's second largest supplier, is delivering natural gas at maximum capacity and can't replace any missing supplies from Russia, its prime minister has said.

Southern Europe can receive Azeri gas via the Trans Adriatic Pipeline to Italy and the Trans-Anatolian Natural Gas Pipeline (TANAP) through Turkey.

Neighboring countries can transfer gas via interconnectors, but nations may be unwilling to part with gas they might need and importers would have to pay a high price.

Barclays analysts said fully replacing 150 billion-190 billion cubic metres (bcm) a year of Russian gas to the EU is not achievable in the short term.

They said Russian winter gas deliveries to the EU will be around 48 billion cubic metres (bcm) at current run rates, down 30% year-on-year.

"If Russian flows remain depressed, EU gas storage will likely end the season at a low 20 bcm, even after relatively soft winter demand and strong LNG imports," they said.

The European Union wants to require countries to fill natural gas storage ahead of each winter, to help bolster stocks and cope with supply disruptions, according to a draft document seen by Reuters last week.

Russia has said it will continue to deliver uninterrupted natural gas supplies to world markets, in a letter to an energy conference in Doha.

"We do not think it likely that Russia would shut off gas supplies to Europe. Russia delivered gas to Europe through the Crimea crisis in 2014/15 after the imposition of selected sanctions in response, and at the height of the cold war," said Barclays analysts.

LNG imports to north-west Europe, particularly from the United States, hit a record high of around 11 bcm in January.

But Europe's LNG terminals have limited available capacity to absorb extra supply in the event gas from Russia is disrupted.

Qatar, one of the world's top LNG producers, said on Tuesday that neither it nor any other single country has the capacity to replace Russian gas supplies to Europe with LNG, as most volumes are tied to long-term contracts and have clear destination clauses.

Non-Gas Options

Several nations have options to fill the gap with power imports via interconnectors from neighbors, or increased power generation from nuclear, renewables, hydropower or coal.

But nuclear availability is declining in Germany, Britain, Belgium and France due to ageing plants, decommissioning, phase-outs and frequent outages.

Under pressure to meet climate targets, several EU countries have shut down old coal-fired power plants or are not building new ones.

Some countries retain coal plants for back-up supply. Europe has been switching to coal from gas since the middle of last year due to high gas prices.

In past crises, countries have introduced measures to reduce industrial production at certain times, pay back-up generators to switch on supply, order households to curtail energy use, or enforce temporary power cuts.

Has Supply to Europe Been Disrupted Before?

The past 15 years have seen several disputes between Russia and Ukraine over gas, mostly to do with prices paid.

In 2006, Gazprom cut off supplies to Ukraine for one day. In the winter of 2008-9, disruptions to Russian supply rippled across Europe.

In 2014, Russia cut off supplies to Kyiv after annexing Crimea. Ukraine stopped buying Russian gas in November 2015.

Ukraine has reduced reliance on direct gas imports from Russia via a reverse flow mechanism, allowing it to import from EU countries.

Related News

Related News

• Most Read
• Most Commented