The Ukraine crisis has revived the role of natural gas What strategic weapon. The possibility that Russia decides to cut off the pumping of gas to the countries of the European Union (EU) generates great concern. The Russian state company Gazprom supplies more than a third of the gas consumed by households and industries in the EU, a figure that shows great dependence. An important part circulates through the gas pipeline that crosses the Ukrainian territory. In fact, the Russian threat is beginning to materialize. The The Kremlin has announced that it will cut off one of the routes that supplies gas to the EU, the supply through the Yamal gas pipeline in Poland. Previously, Ukraine stopped pumping through another pipeline that runs through its territory towards the community bloc.
Experts maintain that if only this conduit is closed, the blow, even though it is strong, can be circumvented. There are containment alternatives, they say. But we must foresee the worst, that the Russian president, Vladimir Putin, decide to close all keys. As the President of the European Commission, Ursula von der Leyen, put it, the EU’s goal is “to achieve a continuous, sufficient and timely supply from various sources around the world.”
The crisis has boosted the market for liquefied natural gas (LNG), which reaches its destination in large merchant ships. Offers are not lacking. The main supplier in this time of crisis is the United States (USA). Since last October, an authentic fleet of large methane tankers has been arriving in Europe from the US East Coast, which has made the North American country the largest supplier of LNG to the EU.
Some of these merchant ships had Asian countries as their final destination, but they corrected their course and ended up docking at European ports. Shortest route and higher profit margin. Spain is the EU country with the largest number of plants for regasification and storage of LNG. It concentrates seven of the 22 existing in the European continent. In any case, it will not be easy to distribute the stored fuel from the Peninsula due to the lack of large-capacity gas pipelines. It must also be taken into account that the supply of LNG by sea today represents a great logistical challenge. Maritime transport networks are at the limit as a consequence of the accumulation of merchandise after the stoppage and slowdown of world trade due to the pandemic.
Brussels has also knocked on the door of Qatar, a country that shares with Iran one of the largest gas fields in the world. Currently, the percentage of LNG reaching the EU from the wealthy little emirate in the Persian Gulf is only 5.2%. Australia has also joined the list of suppliers, offering its gas to Europe at “affordable” prices.
Despite these “goodwill” gestures, a total Russian supply cut-off would leave some European countries in a vulnerable situation, such as Germany, in the process of eliminating nuclear plants and forced to burn less coal to stop emitting CO2. Today, Germany is the largest consumer of gas in Europe. Russia supplies more than half of what it consumes. Perhaps for this reason, Germany is one of the EU countries who has been less hostile with Russia.
wind in favor
Something similar happens with Italy, another of the vulnerable countries, even though it receives algerian gas, but totally insufficient to cover the demand. In a telephone interview this week, President Putin, who days before met with a group of important Italian businessmen, which generated great controversy, promised Prime Minister Mario Draghi that he will not lack gas.
In any case, the passing of the months makes the wind blow in favor of the European countries. Gas consumption drops drastically starting in the spring. At this time of year, demand decreases up to 60% compared to January. But you have to prepare for the rest of winter and for the next one, in case things end up turning more than desired.
In this crisis, anything can happen, but experts believe that it is unlikely that Putin will decide to turn off the tap completely, mainly because it would be a hard blow also for the Russian economy. 85% of Russian gas exports go to EU countries. A pressure factor for Putin, moreover, is the Nord Stream 2 pipeline, which runs along the bed of the Baltic Sea to connect with Germany, without going through Ukraine, to supply energy to central Europe. The gas pipeline is pending the approval of the Government of Berlin to start it up. Russia is very interested in this new conduit as it will be added to the one already in operation NordStream, inaugurated in 2011. Nord Stream 2 will double the current capacity of said infrastructure. More sales and more benefits.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.