Europe is racing to prepare for an energy crisis this winter

Europe is racing to prepare for an energy crisis this winter

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By Miranda Murray, Rachel Moore and Tassilo Hamill

BERLIN/PARIS (Reuters) – European governments outlined new measures on Monday to tackle potential energy shortages this winter and raced to improve energy-sharing power grids, with Russian gas flows continuing at very low rates amid the Ukraine war.

Germany said it expects to sign contracts to liquefy natural gas in the United Arab Emirates. With the shutdown of its main Nord Stream 1 pipeline to Russia, it plans to build new LNG terminals to ship gas, while European partners Spain and France have also been working on contingency plans.

“If all goes well, the savings in Germany are high and we have a little luck with the weather, we have a chance to spend the winter comfortably,” Economy Minister Robert Habeck said after touring a future LNG terminal. in Lubmin in northern Germany.

Habeck said Germany would not allow major gas importers such as VNG to go bankrupt, while an Economy Ministry spokesman said “focused” discussions on aid were underway with struggling importer Uniper.

Russia, which supplied the European Union with about 40 percent of gas before it invaded Ukraine in February, said it had shut down the pipeline because Western sanctions had hampered operations. European politicians say this is an excuse and accuse Moscow of using energy as a weapon.

German buyers briefly booked capacity on Monday to receive Russian gas through the Nord Stream 1 pipeline, once one of Europe’s major gas supply routes, for the first time since the pipeline closed three weeks ago. But they quickly dropped the orders.

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It was not immediately clear why buyers were placing orders for capacity while Russia has given no indication since it shut down that it will restart operation any time soon.

Russian gas flows to Europe through Ukraine continued, although significantly reduced.

But the sharp decline in Russia’s fuel exports, in response to Western sanctions over Moscow’s invasion of Ukraine, has prompted governments to seek energy resources, but also to warn of blackouts amid fears of a recession.

The Bundesbank said on Monday that the German economy is already shrinking and is likely to get worse during the winter months as gas consumption is reduced or rationed.

Energy cuts?

The head of France’s energy watchdog said natural gas exports to Germany could start around October 10, after President Emmanuel Macron announced that the two European Union neighbors would help each other with electricity and gas flows.

“Gas (so far) was only flowing from Germany to France, so we didn’t have the technical tools to reverse the flows and we didn’t even have a way to regulate prices,” Emmanuel Wargon, head of the investment committee, told France Info radio.

While French energy group EDF (EPA:) races to repair corrosion-damaged nuclear reactors, “extraordinary” measures this winter could include blackouts if the winter is cold and EDF plans are delayed, Wargon said.

“But there will be no gas outages in homes. Never,” she said.

Spain’s Industry Minister Reyes Maroto said that requiring energy-intensive companies to close during peak consumption periods is an option on the table this winter if necessary.

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She said in an interview with the Spanish news agency Europa Press that the companies will be compensated financially, adding that there is no need to impose such closures now.

National grid operator Vingrid has warned Finns to prepare for the blackout.

Referring to the unrest across the continent, Finnish electricity retailer Karo Voyama Oy said it had filed for bankruptcy due to a sharp rise in electricity prices.

Back in time

Meanwhile, Ukraine accused the Russian forces of bombing near the Pevdnoukrainsk nuclear power plant in the Mykolaiv region of southern Ukraine.

Since driving its forces out of Kharkiv, Russia has repeatedly fired on power plants, water infrastructure and other civilian targets in what Ukraine says is revenge for defeats on the ground. Moscow denies deliberately targeting civilians.

Data from Gas Infrastructure Europe showed that European gas storages are now 85.6% full, with stocks in Germany approaching 90%.

“Inventory building is set to continue further, supported by the completion of planned maintenance and increased Norwegian inflows from this week,” analysts at Energy Denmark said in a morning note.

Meanwhile, analysts said Europe’s imports of thermal coal in 2022 could be the highest in at least four years.

European imports of thermal coal could rise this year to around 100 million tons, the most since 2017, according to Noble Resources International Pte Ltd, while commodity pricing agency Argus expects shipments to reach a four-year high.

“Europe is going backwards in time,” Rodrigo Echeveri, head of research at the Nobel Prize, told the conference.

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Oil prices fell more than 1% on Monday, weighed by expectations of weak global demand and a stronger US dollar ahead of a massive interest rate hike, although supply concerns limited the decline.

Oil has also come under pressure from weak demand forecasts, such as last week’s forecast from the International Energy Agency that the fourth quarter will see zero demand growth.

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