Stocking Up

Fears of Russian Gas Shortages Heating up in Eastern Europe

ukraine
Valve control wheels sit on pipes at the reverse flow compressor station for the Vojany-Uzhorod gas pipeline to Ukraine, operated by Slovak pipeline operator Eustream AS. The pipeline has been booked to ship 10 billion cubic meters a year until 2019, or about 20 percent of Ukraine's demand.
  • Why it matters

    Why it matters

    Germany has plenty of gas reserves as winter approaches, but Europe depends on Russia’s natural gas to heat homes and keep industry running.

  • Facts

    Facts

    • Latvia’s national energy company has Europe’s second largest gas storage facility, capable of holding 2.3 billion cubic meters.
    • The European Energy Security Strategy outlines short- and long-term measures for guaranteeing secure supplies of energy in Europe.
    • This week Slovakia opened a pipeline that can deliver up to 20 percent of the natural gas that Ukraine needs annually.
  • Audio

    Audio

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Forty-seven German storage facilities can hold up to 23 billion cubic meters of natural gas – about one-fourth of what Germany uses each year. They are now nearly filled with 19.6 billion cubic meters. No other European country has comparable reserves.

Despite growing tensions between Russia and the West, gas importers assume that natural gas will continue flowing from Russia to Germany this winter. “Neither side is interested in making gas part of the conflict,” said Johannes Teyssen, chief executive of the German energy company Eon. “There is no danger of German living rooms becoming cold this winter.” Germany currently imports about one-third of its natural gas from Russia.

While nothing in Germany points to a cold winter, anxiety over natural gas supplies is growing in Eastern Europe. Six European Union countries – Finland, Bulgaria, Slovakia, Lithuania, Latvia and Estonia – get almost all their natural gas from Russia. In the Czech Republic, the situation is not much better.

“The winter will be cold and expensive,” said one Latvian energy expert. A halt in Russian gas deliveries would present the Baltic states of Latvia, Lithuania and Estonia with severe problems in supplying their populations.

The second largest gas storage facility in Europe is located in the Latvian city of Inčukalns, about 40 kilometers east of Riga, the capital. The national utility company, Latvijas Gaze, started filling the giant reservoir last May. It can hold 2.3 billion cubic meters and could assure the supply of gas in Latvia this winter.

A halt in Russian gas deliveries would present the Baltic states with severe problems in supplying their populations.

But the Latvian government is still concerned because Latvijas Gaze is owned half by the Russian energy company Gazprom and half by Germany’s Eon. The worry in Riga is that Eon could sell its share of the Latvian storage facility to Gazprom.

Other Baltic countries are taking steps. In Lithuania, a liquefied-petroleum-gas terminal has been built at the port of Butinge to help cover possible shortages with deliveries from Norway. In Estonia, the production of shale gas has been underway for some time. But it can replace only a small part of the country’s Russian gas imports.

The governments of Latvia, Lithuania and Estonia also are pursuing plans to connect the Baltic natural gas pipeline to the rest of Europe. That could compensate for their almost complete dependence on imported Russian gas, but linking up with Europe’s network of gas lines will take time, and the coming winter will arrive inevitably.

For years now, the European Union has tried to become less dependent on Russia – with tighter integration of gas networks, alternative pipelines and new contacts to other suppliers.

Only recently, the European Commission in Brussels, at the behest of E.U. member states, issued a European Energy Security Strategy, which outlines short- and long-term measures for guaranteeing secure supplies of energy.

According to the suggestions, countries should expand their storage facilities and pipelines, make better use of domestic energy sources and build missing infrastructure links. In October, the European Commission plans to present the results of its stress tests for the energy supply system.

One part of the E.U. strategy is based on the possibility of reverse gas flows. This week Slovakia opened a pipeline that can deliver up to 20 percent of the natural gas that Ukraine needs annually. The move was a reaction to a decision by Gazprom in Russia to reduce deliveries because of disagreements over pricing. Hungary and Poland also have pipelines that can deliver gas to Ukraine.

While Europe is working on reducing its dependence on Russian gas, the Russians are looking to China. During his state visit to Beijing this spring, Russian President Vladimir Putin sealed a deal to supply gas to China for 30 years. Mr. Putin called it the “contract of the century.” This week he attended a groundbreaking ceremony for the new China pipeline, Sila Sibirii, or “Power of Siberia.”

Russia, according to a Gazprom official, is diversifying its markets. But Europe clearly remains the main customer for now, even if Mr. Putin says differently. Starting in 2019, a maximum of 38 billion cubic meters of natural gas will flow annually through the pipeline into China. That’s significantly less than can be delivered to Europe by large networks through Ukraine and Poland, in addition to the “North Stream” Baltic pipeline and “South Stream” planned through the Black Sea.

 

Gas durch die Ukraine-01 (2)

This article was translated by George Frederick Takis. Greg Ring also contributed. To contact the authors: Berschens@handelsblatt.combrueggmann@handelsblatt.com, Siebenhaar@handelsblatt.com,  steuer@handelsblatt.com and Stratmann@handelsblatt.com

 

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