Fear of a cold winter
Who supplies gas when Putin turns off the tap?
By Diana Dittmer
01/28/2022, 18:07
More than half of Germans expect bottlenecks in the gas supply. Russia is the largest gas supplier. Are we sliding towards an energy catastrophe as a result of the Ukraine conflict? The focus is on the USA and Qatar as substitute suppliers. But it’s not that easy.
The Russia-Ukraine conflict and the explosion in natural gas prices are fueling increasing fears about the security of gas supplies. According to a recent survey by the opinion research institute Forsa for the RTL/ntv trend barometer, more than 60 percent of those surveyed in Germany believe that the conflict will result in bottlenecks in the supply of Russian gas to Germany. Who should close the supply gap? And how real is the risk that Kremlin boss Vladimir Putin will throttle exports because of the dispute?
Concerns about a gas shortage are not unfounded. Putin knows about Russia’s power. According to experts, the share of Russian natural gas in Germany’s demand is between a good 30 and 50 percent. Around half of the 41.5 million households in Germany heat with gas. Not only do consumers have to fear the consequences of a shortage in the middle of winter, industry also has to worry: some sectors, such as the ceramics industry, would not be able to produce at all without natural gas.
So how can the supply be ensured? Contingency plans that the US and Qatar are allegedly forging with European suppliers have brought the coordinators into focus as substitute suppliers. The USA and Qatar are already delivering liquefied natural gas (LNG – Liquified Natural Gas) to Europe in tankers. Both have signaled they want to help and are ramping up their deliveries. However, experts are critical of the fact that this is sufficient.
USA can hardly deliver anymore
The US is a heavyweight in the liquefied gas market – they have now overtaken Qatar and Australia as top suppliers. But since the Russian state-owned company Gazprom has been keeping the delivery quantities low and thus driving up prices, the delivery quantities from America have increased enormously. According to the EIA, around half of the liquefied natural gas from the USA landed in European ports by tanker in December. This corresponds to an increase of 16 percent over the previous year, more is hardly possible.
In order to get even more LNG to Europe in the event of a halt to Russian gas supplies, the necessary infrastructure on the continent would have to be expanded. So-called LNG terminals can be found in Great Britain, the coasts of north-west Europe and the Mediterranean. Such systems have not been available in Germany to date.
There are also bottlenecks in the USA: no further LNG plants have been approved for 2021, and a dozen are under construction. The capacities in the export plants, where the natural gas is cooled down and liquefied, are also at the limit. The market could not “react to a much higher demand from Europe” so quickly, quoted the “Zeit” energy expert Kirsten Westphal.
So should Russian forces invade Ukraine and Russian natural gas supplies falter, the US will not be Europe’s ace up its sleeve. The largest suppliers to Russia are Norway with 20 percent and the Netherlands with a twelve percent share of German gas requirements. In Germany, no more than five percent comes from our own funding. About a fifth of the demand (about 22 percent) is usually fed from storage caverns, the rest from other sources. There doesn’t seem to be much to gain anywhere here. The boss of the power plant operator Uniper, Klaus-Dieter Maubach, states: “Russia cannot be replaced as a supplier in the coming years”.
Qatar and Libya have no reserves
According to the US finance agency Bloomberg, the desert state of Qatar, which is one of the world’s largest gas producers and exporters and which already supplies Great Britain and other European countries with LNG, is also unable to make compensation deliveries. The same applies to Libya, which also has a lot of gas and would be a welcome substitute in the natural gas market due to its proximity to Europe. Both countries have already contractually guaranteed their entire production volumes to customers. Which does not rule out the possibility that deliveries cannot be diverted because demand is suddenly lower elsewhere, writes Bloomberg.
The problem is that the Ukraine conflict is escalating at a time when gas is scarce around the world. Economies have started to recover from the Corona crisis. This has shrunk the energy reserves. No supplier currently has too much gas. Otherwise the situation would not be so dramatic. In the talks that the USA and Qatar are said to be already having with the suppliers in Europe, a different strategy is also becoming apparent.
The talks are said to be “really far-reaching” and “with many companies and countries around the world.” The US and Qatar would “not ask any single company or country to increase exports by significant amounts, but rather by smaller amounts from a variety of sources.” In other words: The remainder ramp on the gas market is viewed and everything is bought up, wherever there is something to be gotten – even if it is only in small quantities – in the hope that the total quantity will close the gap.
Maybe Putin is just bluffing
The good news is that experts say the risk of Russia cutting off gas supplies to Europe if the Ukraine crisis escalates is real but unlikely. “We’ll get through the winter,” says Claudia Kemfert from the German Institute for Economic Research (DIW) ntv. It has not yet been decided whether Russia will actually deliver less. Because “so far, the delivery commitments have been met”. However, the economist sees one problem: “The fact that we are too dependent on Russian gas is problematic.”
Karen Pittel from the Ifo Institute also reassured: “I would be very surprised if Russian natural gas deliveries were to come to a standstill because of the Ukraine conflict – as revenge for sanctions.” The fact is, Russia is in dire need of foreign exchange earnings from natural gas sales.