Wednesday, August 17, 2022

Prospect of War in Ukraine Raises Questions About Europe’s Natural Gas Supply

One of the many unsettling questions raised by the possibility of a Russian invasion of Ukraine is what an armed conflict in Eastern Europe would do to the energy supply of the countries of the European Union, which have become increasingly reliant on Russian natural gas for electricity generation , industrial applications, and commercial and residential use.

According to the US Energy Information Administration, the countries of the European Union and the United Kingdom imported more than 80% of the natural gas they consumed in 2020, up from 65% a decade before.

Of the gas it imports, the EU receives the majority of it, about 74%, via pipelines. The remainder arrives in liquid form, typically on specialized cargo ships. Russia is the largest supplier of the fuel to the countries of the EU, with about 35% of total imports, all of it arriving via multiple pipelines, many of which cross through Ukraine on their way to countries in central Europe.

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To be sure, a major disruption in natural gas transmission to Europe would also negatively affect Russia, which relies on energy sales for much of its income, Charlie Riedl, executive director at the Center for Liquefied Natural Gas, told VOA. He said an outcome that leaves Russia without that income stream is likely not a viable situation for Russian President Vladimir Putin over the long term.

“It has long-term ramifications for Russia’s gas business — something that Putin is, I’m sure, acutely aware of,” he said. “Losing market share in Europe is problematic, given that the vast majority of Russian-produced gas winds up in Europe. So, there are challenges associated with that, if you’re thinking about this from a Russian standpoint, in addition to the sanctions that they will be facing on a broader scale.”

FILE – The tanker Sun Arrows loads its cargo of liquefied natural gas from the Sakhalin-2 project in the port of Prigorodnoye, Russia, on Oct. 29, 2021.

Different degrees of disruption

Should Russia send troops into Ukraine, disruptions caused by fighting could prompt some shortages, particularly in Slovakia, Austria and Italy, which receive most of their natural gas through pipelines via Ukrainian territory.

However, Europe would likely face other disruptions, not directly caused by fighting.

The United States and its NATO allies have promised to apply a set of punishing international sanctions on Russia if it sends troops into Ukraine. If those sanctions include a refusal to buy Russia’s gas, or if Moscow elects to turn off the flow in retaliation, the shortage of gas flowing into Europe would further worsen.

This could result in an energy crisis that would leave the EU searching for alternative sources of natural gas, much of which is not near at hand. Norway pumps a considerable amount of gas into northern Europe through existing pipelines, but according to officials in that country, the system is operating at full capacity. Flows from the UK and Denmark are also unlikely to fill the gap.

Other pipelines serving Europe include the Trans-Anatolian Natural Gas Pipeline, which moves gas from Azerbaijan through Turkey, and a network of pipelines in North Africa that connect to Spain and Sicily.

A major new pipeline known as Nord Stream 2, which would deliver Russian gas directly to Germany by crossing under the Baltic Sea, is awaiting approvals before it can come online. US President Joe Biden has warned that the US will take whatever steps it can to block the new pipeline from opening if Russia invades Ukraine.

FILE - Men work at the construction site of the Nord Stream 2 gas pipeline in Lubmin, northeastern Germany, March 26, 2019.

FILE – Men work at the construction site of the Nord Stream 2 gas pipeline in Lubmin, northeastern Germany, March 26, 2019.

Few good options

“Unfortunately, Europe has found itself in a position where it doesn’t have too many good options,” Dustin Meyer, vice president of natural gas markets for the American Petroleum Institute, told VOA.

The only real alternative to existing pipelines is to increase the amount of gas that Europe imports in liquefied form. The EU does have a large number of liquefied natural gas (LNG) import terminals dotting the coast along the Mediterranean Sea, the North Atlantic, and the North and Baltic seas.

However, Meyer said, “a lot of those terminals are being fully utilized for the first time in a while. That helps make a bad situation a little bit better. But they’re running at pretty much full capacity, and the main threats — either a pipeline cutoff through Ukraine or a total pipeline cutoff — haven’t happened yet. So, while that import capacity is significant, I don’t think anybody really expects that with their existing infrastructure, Europe could just totally turn away from Russia right now, and instead rely entirely on, say, LNG imports.”

A matter of years

Experts say the prospect of losing access to Russian gas is likely to lead to governments across Europe creating more capacity to import LNG from the United States and other countries, but they warned that creating that new capacity, on both the demand and supply sides, will take time.

Even with most of the world’s LNG-transporting ships currently delivering their cargo to Europe, Riedl of the Center for Liquefied Natural Gas told VOA, “there is not enough LNG on the water, regardless of its coming from the United States or anywhere else around the world, to alleviate [the shortage] if Russia were to cut off all supplies.”

And that’s not a problem that can be solved soon. Even if export capacity in the US and other LNG-exporting countries rises, Riedl said, Europe’s ability to handle increased imports will take time to develop.

“If they started today, it would be multiple years — a five-to-seven-year kind of time frame — and that would be a best-case scenario,” he said.

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This article is republished from – Voa News – Read the – original article.

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