August 11, 2022

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Europe braces for a potential gas crisis as historic heatwave boosted demand

Europe braces for a potential gas crisis as historic heatwave boosted demand


London
CNN Business

Europe prepares for full potential gas crisis Only later this week Historic heat wave The demand for energy to help cool homes and businesses has increased on the continent.

Thursday , Nord Stream 1 . pipeline – The vital artery connecting Russian gas to the conglomerate – due to reopen after 10 days of routine Maintenance work. But concern is growing that Russia will keep the taps turned off in response to the sanctions imposed by the European Union since Moscow’s invasion of Ukraine in February.

Robert Habeck, Germany’s economy minister, said earlier this month that the country should “prepare for the worst”.

“Anything can happen. Gas can flow again, even more than before. Nothing may come at all,” Habeck said in a radio interview.

The pipeline transports 55 billion cubic meters of gas annually to Europe, or about 40% of the total pipeline imports from Russia.

Complete separation from Moscow gas is not out of the question. The country has already cut off its gas exports to the country Several European countries. Last month, Germany, the region’s largest economy, Declare a “gas crisis” After the Russian state-owned gas company Gazprom reduced exports through the pipeline by 60%.

Gazprom blamed the move on the West’s decision to block vital turbines due to sanctions.

German gas distributor Uniper confirmed on Monday that it had received a letter from Gazprom claiming force majeure on past and current gas delivery shortfalls. Force majeure is a condition in the contract that justifies the company for not fulfilling its obligations. It is usually invoked in extreme circumstances such as natural disasters.

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But a Uniper spokesperson told CNN it had “formally rejected” the claim. On Monday, the embattled company also withdrew a 2 billion euro ($2.04 billion) credit facility from KfW Bank due to the impact of the Russian gas supply disruptions.

And this week’s gas crisis may come at the worst of times. Europe is getting very hot in record temperatures – parts of France and Spain have been attacked Fighting forest fires Temperatures are expected to rise above 40 degrees Celsius (104 degrees Fahrenheit) in the coming days.

The high temperatures have resulted in a high demand for electricity to operate air conditioning units. Enagas, the operator of Spain’s gas transmission system, said last week that demand for natural gas for electricity production hit a new record high of 800 gigawatt-hours.

“This huge increase in demand for natural gas for electricity production is mainly due to the high temperatures recorded as a result of the heat wave,” Enagas said in a press release last Thursday.

Some analysts were more optimistic, given the alternative energy sources in Europe and the fact that the heat wave will be over by midweek.

“Although energy consumption in the European Union will be a little higher this week in the heat wave due to higher usage rates for air conditioning units, this will be offset by a record supply of solar power generation,” Henning Gloesten, director of energy, climate and resources at Eurasia Group, told CNN. Business.

Meanwhile, European countries are racing to fill their gas storage facilities to avoid potentially disastrous power shortages during the winter.

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Fatih Birol, executive director of the International Energy Agency, said in a press release on Monday that the “next few months will be critical” to support the bloc’s supply.

“If Russia decides to completely cut off gas supplies before Europe can raise its storage levels to 90%, the situation will be more dangerous and challenging,” he added.

Gas storage levels across the European Union are currently around 64%, according to Gas Infrastructure Europe.

The union is quickly securing gas supplies from other countries as it reduces Russian gas imports. On Monday, the European Commission signed a memorandum of understanding with Azerbaijan to double the capacity of the main gas delivery route over the next few years.

Prices for Dutch natural gas, the European standard, rose 3% to 165 euros ($167) per megawatt-hour on Monday from Friday, according to data from the Intercontinental Exchange.

Earlier this month, fears of a major gas outage Paid prices to its highest since the early days of the Russian invasion of Ukraine, hovering around €183 ($186) per megawatt-hour. Prices are up 129% since the beginning of the year.

Julia Horowitz, Sharon Brown Peter, Sharon Braithwaite, and Chris Liakos contributed to the report.