Indeed, winter gas has come to Europe. Meteorologists speak of an expected “cooler trend” on the continent. Similarly, the most strategic energy resource, gas, has been decorating media headlines and press statements. After several gas disputes between top suppliers to the EU, Russia, and transit country Ukraine, it was proven once again that not only oil, but also gas is part of a chaotic business. In order to secure supply for the continent’s millions of consumers in the event of similar disruptions, the EU, in close cooperation with others on the continent, came up with an Energy Security Strategy. Now that Europe is facing the cold temperatures departing the Arctic – ironically a gas-loaded haven – is gaspolitics reaching peak sensitivity levels again? Is the EU prepared for the winter that has come? And what is the state of affairs in its most strategic transit-country, Ukraine?
Due to last year’s mild winter, the EU is said to be well-prepared for the current winter in the sense that some member states have stocked up. In autumn 2015, the EU’s average utilization of storage capacities was 11 percentage point lower than a year earlier. Member States such as Denmark, the Netherlands, Romania, Croatia, France, and the United Kingdom, have significant stock levels sufficient to satisfy domestic demand in the case of a severe winter for the coming months. In addition to those with own stocks, the Baltics are satisfied through Liquefied Natural Gas (LNG) terminals, fed by Norwegian gas, and smaller amounts of Russian gas import. Similarly, most of the Southern Member States are importers. They are able to receive Algerian, Nigerian, and Libyan gas. Central and Eastern Europe’s needs, in comparison, are diversely satisfied. One part of demand is satisfied by Russian gas. Additionally, own stocks are used, such as in the case of Romania, Slovakia, Poland and Hungary. A third part is met by Slovak and Hungarian supplies. Generally, Central and Eastern Europe have started undertaking ambitious energy policies, after passivity for two decades. In fact, to ensure their energy security, more projects in the East are in construction. For example, Poland’s LNG Terminal will receive its first commercial gas from Qatar in a few months’ time.
What about Ukraine?
Ukraine, traditionally satisfied by Russian gas, does not receive gas from Russia anymore. After becoming a part of the so-called Winter Package, it agreed to the terms of gas deliveries until spring 2016. Yet, a month after signing, Ukraine withdrew and halted Russian gas imports in November. Analysists argue that the country has sufficient gas to satisfy demands during a severe winter. Nonetheless, this is said to not impact the EU’s supply through Ukraine. The passage is said to remain untouched, in the same way that gas flow from Russia through Ukraine was not disrupted during the height of the Russia-Ukraine conflict.
Whether speaking of Mainland, Northern or Eastern Europe, or whether speaking of imported or domestic stock, there will be increased demand across the continent. In fact, it is expected that demands will reach a peak this month for the first time in many years. Will this lead to gas-politics? It is difficult to tell whether certain politicians will use the increased demands by importers as a tool of coercion. What is more certain, however, is that higher power and gas prices will very soon accompany the peak rise in demand. With cross border energy trade representing 64% of Europe’s consumption, the total import bill adds up to over €1 billion per day. The increase in gas prices could topple the low gas prices that the largest electricity markets in Europe have been facing for the past 12 years. Whether the European economies and the EU economy are ready for the sudden expenditure is yet to be seen.
Member of the Natolin Energy Group