Page 25 - RusRPTNov22

sanctions, the Ukrainian transit system and the smaller TurkStream are the only routes left for Russian gas. If TurkStream were left open, which seems likely, Europe would be left with less than 10% of the gas that it received from Russia last year.
Meanwhile, there are limited prospects for increased supply from North Africa in the near future, and only small incremental volumes potentially available from Azerbaijan and Norway. The giant Groningen field in the Netherlands could provide as much as 15-20bn cubic metres per year of gas, but so far the Dutch government has ruled out ramping up production because of the risk of causing earthquakes.
A lot of hope has therefore been invested in LNG, in terms of how much extra supply can be brought on stream and how much volume can be diverted away from Asian markets. For the time being Chinese LNG demand remains low, because of a slowdown in industry, with the country on track for its biggest decline in LNG imports in history this year. That has eased pressure on European supply so far, and Chinese importers have even been reselling contracted volumes to Europe. But the situation could easily change. And then there is the risk of supply disruptions, like the one that occurred at the Freeport LNG plant in Texas earlier this year.
Demand side One must also consider the demand side of the equation. High gas and power prices have led to significant demand destruction already – at a great cost to industry particularly in Germany. The European Commission has been trying to co-ordinate reductions so no sector suffers too greatly.
Natural gas and power demand are extrinsically linked – gas-fired power plants accounted for a fifth of Europe’s generation mix in 2021. And so in order to reduce demand for the former, demand for the latter must also be cut. But while the European Commission is targeting a voluntary 15% cut in gas demand over the August 2022 to March 2023 period, it has only proposed a voluntary reduction of 10% in gross electricity consumption, as well as a mandatory target for cutting electricity usage by 5% during peak hours. It may well be prudent to expand these targets, to avoid the risk of supply shortages, and national governments must follow the same course.
There also needs to be an increased focus on energy efficiency – getting the same result for lower consumption – but also energy conservation – avoiding energy use when it is not vital. For example, such measures include reducing lighting and lowering thermostats in public buildings and closing non-essential infrastructure. Households are conserving energy anyway, regardless of what instructions governments make, because of high prices.
Governments must also take a more pragmatic approach to expanding the use of alternative fuels and energy sources to gas wherever possible. That means Germany delaying plans to close down its remaining nuclear power plants (NPPs) at the end of this year. It also means burning more coal and oil, despite the environmental cost. Failure to take such steps will further worsen the coming recession, making it harder for countries to invest in decarbonisation further down the line.
25 RUSSIA Country Report November 2022 www.intellinews.com