EU urges government cooperation as Russian gas supply may be cut

By EWA KRUKOWSKA
Bloomberg

European Union governments must step up cooperation to manage potential disruptions in supply of natural gas amid conflict between Ukraine and Russia, the bloc’s executive said in a report on the EU system’s resilience.

Russian gas accounted for 27% of the bloc’s consumption of the fuel last year, according to EU data. About half of Russian gas to Europe crosses Ukraine, making European supplies vulnerable to disputes between the former Soviet allies.

European countries including Slovakia and the Balkan nations already suffered from disruptions of Russian gas supply via Ukraine in freezing temperatures in 2006 and 2009.

“If we work together, show solidarity and implement the recommendation of this report, no household in the EU has to be left out in the cold this winter,” EU energy commissioner Guenther Oettinger said.

The gas stress report presents results of a modeling exericise carried out by 38 European countries, including the 28 EU nations and neighboring states. It analyzes several disruption scenarios, including a complete halt of Russian gas imports into the EU for six months.

Different six-month disruption scenarios show that after reshuffling the supply mix the EU and Energy Community contracting parties, excluding Ukraine, would still be missing between five and nine billion cubic meters of gas. That equals about 1% to 2% of annual EU consumption, the commission said.

Assuming maximized use of infrastructure and normal market conditions, Russian imports would be replaced particularly through the import of additional volumes of LNG.

Contracting Parties

Energy Community contracting parties include Albania, Bosnia and Herzegovina, Republic of Macedonia, Moldova, Montenegro, Servia, Kosovo and Ukraine.

“A prolonged supply disruption would have a substantial impact in the EU, with the eastern member states and the Energy Community countries being affected most,” the commission said. “Finland, Estonia, the Former Yugoslav Republic of Macedonia, Bosnia and Herzegovina and Serbia would miss at least 60 percent of the gas they need.”

Should all Russian imports be halted and transit via Ukraine disrupted, the absence of cooperation between EU member states would mean Hungary and Poland suffer shorfalls of 30% and 20%, respectively. Less consumers accross the EU will be cut off from the gas if countries work together, instead of adopting purely national measures, according to the report.

A hypothetical two-week cold spell towards the end of the six-month disruption would certainly aggravate the security of supply situation, the commission said. It would affect other central and western European countries including Austria, Czech Republic, Germany, Italy and Slovakia.

Demand Reduction

“Such shortfalls would, on the basis of the model, be of a level below 10%,” the EU said. “This is normally a level within which price-induced (natural) demand reduction would take place without the need for additional measures.”

Moscow-based OAO Gazprom cut off supplies to Ukraine in June, citing $4.5 billion in unpaid bills at the time. The EU is trying to broker an agreement between the two countries to enable resuming flows and prevent disruptions in the heating season until the international arbitration court decides on Gazprom and Naftogaz Ukrainy claims in a price dispute.

The next round of trilateral talks is scheduled to take place on Oct. 21 in Brussels, Oettinger said.

In the short term, EU nations should maximize capacity on interconnectors, make best use of gas storage and ensure that infastructure projects such as the Polish LNG terminal and the Slovak-Hungarian interconnector are implemented without delay, the commission said.

EU recommendations also include advancing fuel-switch plans, introducing short-term energy efficiency, developing regional cooperation on security of gas supply and the need for more transparency.

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