Gas data: without reserves for the whole winter, Europe seeks solutions

It is the most feared winter;

probably the last in which Vladimir Putin's energy blackmail has the potential to trigger a major economic and social crisis in the European Union.

The closure of the Russian gas tap has caught the Twenty-seven off balance, with fewer regasification plants - the only way to process the fuel that arrives by ship - than would be necessary to face the end of the flows from its first exporter, and limited storage capacity.

It is not a problem of lack of vigor in filling policies: gas has been gushing for weeks in the 146 deposits, which will become 160 in the coming years if the countries' plans are brought to reality.

The failure has to do, rather, with its low capacity.

Even if they reach 100% on October 1 —the formal start date of the heating season in the center and north—, they would barely be enough to cover the expected demand until Christmas.

If the current degree of filling of the deposits is maintained, close to 85%, the gas reserves would be enough to cover the demand until the beginning of December.

This is a projection of the European average but, as always happens in such a heterogeneous bloc, the analysis of gas reserves does not withstand an overall evaluation: each country tells a different story.

Some have their warehouses at virtually full capacity, and demand also varies greatly from one to another —some withstand lower temperatures;

others use more of this fuel to generate electricity, so their reserves would not respond the same in a situation of total gas drought.

The broad brush hardly ever works, but in this case even less so.

Despite having their warehouses practically full, Belgium and Portugal could barely meet demand for two or three weeks.

Sweden even less.

And Spain, which has four facilities of this type, would have enough for just over a month.

But the reality is much more complex: except for Sweden, these countries are also the ones with the most options for receiving liquefied natural gas (LNG, in the jargon of the sector: the one that arrives by sea and not by pipeline).

With the arrival of important shipments committed for the coming months, this exhaustion scenario is unrealistic.

Hence their governments strive to deny a supply crisis.

At the opposite extreme are Slovakia and Austria, where reserves would last for at least four months even in the —again, very unlikely— assumption that gas arrivals, not only from Russia, but from any country in the world, were to sink. completely.

In the Netherlands, Hungary, the Czech Republic or Denmark, the room for maneuver is also substantial: three months.

Each one, however, has its particularities: Slovakia, Austria, Hungary and the Czech Republic are landlocked, so they depend entirely on the solidarity of the rest of the Member States.

And the Danes do not have a single regasification plant.

The Netherlands, although it can receive methane tankers, does so in a more modest way than other large countries in the bloc: it only has one fixed plant and has just launched a second, floating and temporary one, in order to get out of the quagmire.

But she has the wild card of the tube connection with Norway.

Warehouses of all kinds

Not all gas tanks are the same.

The range, in fact, is very wide.

In Europe, most are old depleted gas reservoirs, although salt caverns and aquifers are also used.

Spain has four: three old reservoirs —Gaviota, Marismas and Serrablo—, and an old aquifer, Yela.

The fifth was going to be Castor, designed almost two decades ago to take advantage of the geological structure of an old oil field off the coast of Castellón and which promised to provide the equivalent of 50 days of consumption.

It became inactive in 2013, after a series of earthquakes that occurred shortly after the first gas injections, and in 2019 the Government made the decision to permanently seal it.

Crude or mild winter?

The climatological variable is key when it comes to calibrating the risks to which the Old Continent is exposed in the coming months: the harsher the winter, the greater the probability that the gas reserves arrive shivering in the spring.

“If it is extremely cold, the deposits would end up at just 8% of their capacity, below the recommended minimum,” explains Mauro Chávez, Wood MacKenzie's head of gas analysis in Europe.

“That, added to a very tight electricity market due to lower nuclear generation [especially in France] and hydroelectric generation [due to the drought], could result in a rationing of gas and, in general, of energy,” he adds by email. .

In a more benign scenario, with temperatures within the average range of recent years, the block would end the winter with an average storage of 26%, according to data from the Scottish consultancy.

If that were the case, he says, “there would be no gas cuts” and reserves would end the period at levels even higher than those of last March.

"Everything possible must be done to preserve everything stored for the coldest months of winter, not to use it beforehand," says Ana María Jaller-Makarewicz, from the Institute of Energy Economics and Financial Analysis (IEEFA, for its acronym in English).

reserve exhausted

Ancient reservoirs whose geological structure and the fluids it stores are known.

It is the most common type of warehouse.

salt formations

Underground salt domes that are characterized by their impermeability to leaks.

Salt

aquifers

Rock formations that act as natural reservoirs of water with a geological structure similar to that of depleted gas reservoirs.

Aquifer

Underground

reserve exhausted

Ancient reservoirs whose geological structure and the fluids it stores are known.

It is the most common type of warehouse.

salt formations

Underground salt domes that are characterized by their impermeability to leaks.

Salt

aquifers

Rock formations that act as natural reservoirs of water with a geological structure similar to that of depleted gas reservoirs.

Aquifer

Underground

reserve exhausted

salt formations

aquifers

Ancient reservoirs whose geological structure and the fluids it stores are known.

It is the most common type of warehouse.

Underground salt domes that are characterized by their impermeability to leaks.

Rock formations that act as natural reservoirs of water with a geological structure similar to that of depleted gas reservoirs.

Salt

Aquifer

Underground

reserve exhausted

salt formations

aquifers

Ancient reservoirs whose geological structure and the fluids it stores are known.

It is the most common type of warehouse.

Underground salt domes that are characterized by their impermeability to leaks.

Rock formations that act as natural reservoirs of water with a geological structure similar to that of depleted gas reservoirs.

Salt

Aquifer

Underground

demand destruction

In order not to leave everything in the hands of an element as capricious as the weather, governments have accelerated their commitment to savings: that citizens and the private sector avoid waste.

This includes, for example, the mandatory closing of doors in stores or the adjustment of thermostats to avoid excessive temperatures in both summer and winter.

High energy prices are also rowing in this direction, reducing demand naturally: skyrocketing bills are the greatest incentive for companies and households to take maximum care of their electricity and gas consumption.

“We are already seeing demand destruction: there are industries that cannot operate at these prices, and that means that the volume of Russian gas that we initially thought we were going to have to replace is less,” Jaller-Makarewicz outlines.

Radical change in the import pattern

It's no secret: the war in Ukraine and subsequent EU sanctions against Russia have radically altered imports of fossil fuels (oil, gas, coal, already refined fuels...).

In the case of gas, free of obstacles, imports from Russia total 45,000 million cubic meters since the beginning of the war.

It is 19% of imported gas, according to data published weekly by the Bruegel center for European studies.

A huge figure, yes, but also much lower than in previous years: in the same period of 2021, Russian gas was 36% of the total;

in 2020, 37%.

To fill that gap, Norway has stepped up, increasing its shipments to the EU by 12%.

And, above all, LNG arrivals have multiplied: they are already 50% more than in the same period in 2021.

So far in September, events have accelerated.

On the 2nd, Russia cut off the gas that reached the Union through the Nord Stream gas pipeline, alleging technical problems.

The reality, however, is different: with prices at record highs, the Kremlin can afford to sell less volume without its revenues plummeting.

And cutting off gas now makes it difficult to fill the final stage in countries like Germany, the weakest link in the Twenty-Seven in the gas war.

Three days later, the Kremlin admitted that it would not resume activity on the Nord Stream, the largest gateway into Europe.

Until June, when the governments were already beginning to send the population clear saving messages to speed up the collection, half of all the Russian gas consumed in the EU came through there.

But this channel is not the only one that is suffering restrictions: the Yamal stopped transporting gas in May, when Moscow sanctioned the company responsible for the pipeline in Poland.

The boat, the main alternative

The shortage of Russian gas and, to a much lesser extent, the reduction in imports from Algeria via Spain —the North African country closed one of the two pipelines that linked the two countries at the end of 2021—, have forced an increase in LNG purchases since countries as far away as the United States, Qatar or Nigeria.

This greater distance, added to the cost of liquefaction (going from a gaseous state to a liquid, in order to transport it) and regasification (returning it to its original state, for distribution and consumption) makes it notably more expensive.

But for the countries that have the most rope around their necks, the price has become a secondary element.

According to Bruegel data, so far this year the Union has already imported 10% more than in all of 2021. The figure has not stopped growing, a trend that will continue in the final stretch of the year: to the gas drought In Europe, the recent drop in Asian demand for methane tankers is added, largely caused by the global economic slowdown, which has served up an opportunity that European importers are taking advantage of.

The downside of this alternative is that not all countries have regasification plants: the EU today has 24 of these facilities in operation, but six of them are on the Iberian Peninsula, whose tube connection to the rest of the continent is very weak.

Aware of this jewel kept under lock and key, Germany - hungry for energy to feed its industry - has in recent weeks redoubled its support for the MidCat, the Pyrenean tube that promises to release all that gas.

France, however, continues to refuse completely.

Except in specific cases, the European regasification capacity is not enough.

Germany, the largest consumer in the EU, has reached the crisis without a single plant, a revealing fact of the lack of planning of the largest European economy.

After the outbreak of the war, the Government of Olaf Scholz announced the immediate installation of five terminals, including floating and fixed.

And Italy, another country highly dependent on gas in general (a lot of industry in the north; no nuclear generation) and on Russian gas in particular, has bought two floating terminals this summer.

Despite this greater subordination, its LNG processing capacity is a quarter of that of Spain.

Between projects in the proposal phase, planned or already under construction, some twenty installations are planned throughout the Union, as well as a dozen expansion operations in plants already in operation.

A real battle against the clock —never before has the world faced the challenge of replacing so much gas in such a short time— that will be delayed: in 2023, as Goldman Sachs analysts recall, Europe will have to fill its deposits for the next season winter to lung, without the Russian crutch.

But that will be another story: the priority today is the most immediate, overcoming a cold season that seems to be the most difficult as far as memory can go.

Methodology

The gas storage percentage data comes from the information updated daily by GIE, the association that represents European gas operators.

The demand data has been taken from the estimate published in July by ENTSOG, the association that represents the operators of the transmission network.

To calculate how many days the current gas reserves would cover the consumption of each country, we have taken the average daily demand data, month by month, generating a series of accumulated demand to analyze when it exceeds the current storage capacity in each State. .

For the European average data we have added the gas stored in all the warehouses of the European Union and the demand of all the countries and we have operated in the same way.

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