Page 8 - FSUOGM Week 15 2022

FSUOGM COMMENTARY FSUOGM

DATACRUNCH: Sanctions by

the numbers – gas

This article is part of the series DATACRUNCH: Sanctions by the numbers that
dives into the numbers and trends of UN voting, coal, oil, gas, grain.

RUSSIA VOICES are calling very loudly for the EU to transited through Germany, according to OEC.
shut off deliveries of Russian gas immediately. Another affect is if Russian gas were cut off
Since the start of the conflict in Ukraine, Ger- then there would be a mad scramble for LNG to
many has paid Russia some €9bn a week for replace it, but there is simply not enough LNG
gas imports, which are currently running at a available to replace the 152bn cubic metres that
contractual maximum; money, Russia’s critics Europe imported from Russia last year. The vol-
say, that is being used to fund the Russian war ume of gas Russia sends to Europe is equivalent
machine. to one third of global LNG production, but 70%
But German Chancellor Olaf Scholz is very of LNG production is already tied up in long-
reluctant to do it, warning of an economic dis- term contracts, leaving very little wiggle room
aster. Economic institutes advising the govern- indeed to increase supplies to Europe, and far
ment warned on April 12 Germany could face a short of what would be needed to replace Rus-
€220bn ($240bn) hit to output over the next two sian imports entirely. Even if there was more
years if Russian energy is cut off, and a full halt LNG available, the existing LNG terminals are
in Russian natural gas imports would result in mostly already working at close to capacity
a “sharp recession.” The loss to Europe’s biggest and simply do not have the capacity to handle
economy would be equivalent to 6.5% of annual another 152 bcm equivalent of deliveries a year.
output, they said. Without Russian gas deliveries to Europe
Estimates of the economic hit to Germany prices would spike, affecting the UK and Portu-
are of the order of a 2%-3% contraction in GDP, gal in particular, which are both heavily depend-
something the most prosperous country in ent on LNG imports.
Europe can well afford, say his detractors. More- The spike in LNG prices would also cause
over, there is widespread German public sup- an energy crisis in Asia, which is also heavily
port for a ban on Russian gas imports. The new dependent on LNG as supplies are drawn away
chancellor seems to be listening more to industry to Europe. The problem is made even more com-
than his voters, say critics. plicated, as Russia is also the biggest supplier of
But digging into the weeds, it is not as simple LNG to Europe. The US has said that it could
as it appears. The main problem is the Russian increase LNG supplies by 10-15 bcm but that
gas is impossible to replace in the short term and would only replace the banned Russian LNG.
cutting off Russian gas will cause an energy crisis Qatar also said it could redirect another 15 bcm
in Europe and probably in the whole world. to Europe, but that is only 10% of the missing
Cutting Europe off from Russian gas will Russian gas.
immediately have an impact on Europe, and The end of gas imports to Europe would also
Germany in particular, but there are multiple cause a major energy crisis in the coming winter.
secondary effects. The German economy would In another sign of how conflicted Europe is over
contract, but the energy crisis thus created would Russian gas, the EU has ordered that all its stor-
spread much further afield. One of biggest prob- age tanks be filled to 80% by October 1, the start
lems is that Germany doesn't use all the gas it of the heating season, a historic high. That means
imports from Russia. It is the main European pumping as much gas as possible between now
gas hub. About half the gas it receives is sent on and then if that target is to be hit.
to supply other countries – Italy in particular. In At the same time, countries like Poland are
addition, it has the largest storage tanks of any calling for the gas supplies to be shut off now.
country in Europe after Ukraine and is a key part The storage tanks are currently 26.8% full,
of the storage of gas to get through the winter. but the remaining gas would be enough to get
Germany re-exports half the gas that it through the summer without Russian imports.
receives, thereby supplying other gas-depend- But if the process of filling the tanks is not
ent countries. In 2020, Italy imported 34.9% started during the spring there is simply not
of its gas from Russia and is one of Gazprom’s enough time to fill them to the point needed to
biggest European customers, almost all of which get through the winter. Europe would run out

P8 www. NEWSBASE .com Week 15 15•April•2022