What may have been a sense of uneasy security in countries around the world that relied on imported oil and gas has been shaken off. Russia’s invasion of Ukraine, and its role in supplying oil and natural gas to the EU, highlights just how quickly the sourcing of fuel can or must change because of the physical disruption of production, operations, and transportation, or because of sanctions or a country’s own concerns about energy security. The resultant market volatility is being felt around the world.
The European Commission published plans on 8 March to cut Russian natural gas imports by two-thirds this year and end its reliance on Russian supplies “well before 2030.” About 40%, or 150–190 Bcm, of the gas supplied to the EU’s 27 countries is provided by Russia. EU Climate Policy Chief Frans Timmermans said, “The answer to this concern for our security lies in renewable energy and diversification of supply.”
However, renewable energy sources are nowhere near the capacity needed to fill the supply gap and won’t be for many years to come. Diversification of supply is the most feasible alternative now.
The commission said the US, Qatar, and others may be able to provide 60 Bcm of gas and LNG, equivalent to about a third of the Russian supply. Since December, US LNG exports have been heading to Europe to help refill its natural gas storage, which has been at its lowest level in at least 10 years. Storage injections in the summer were limited because of the high volume of LNG exports to Asia, high wholesale gas prices, and reduced supplies from Russia. US LNG exports in March were expected to reach about 8.84 Bcm (projection as of 16 March), exceeding a record 8.6 Bcm in January 2022.
Qatar’s Energy Minister Saad al-Kaabi said in February that his country’s LNG volumes are committed in long-term contracts mostly to Asian buyers, adding that only 10–15% of the volumes may be divertible to Europe.
Other options for the EU, some more quickly implemented than others, include:
- Because Europe’s natural gas is supplied mainly via pipelines, Germany could import gas from Britain, Denmark, Norway, and the Netherlands. Southern Europe can receive Azeri gas via the Trans Adriatic Pipeline to Italy and the Trans-Anatolian Natural Gas Pipeline through Turkey.
- Equinor has received adjusted production permits from the Norway Ministry of Petroleum and Energy to increase gas exports from the Oseberg field by around 1 Bcm in the period up to 30 September. Heidrun field gas exports can increase by 0.4 Bcm for the calendar year 2022. Equinor has also postponed turnarounds on the Oseberg field, based on a thorough evaluation of the plants’ technical integrity, from May to September to accelerate production.
- The Norway Ministry of Petroleum and Energy will offer new licenses to drill for oil and gas, adding 31 exploration blocks in the Arctic Barents Sea in addition to other acreage in the Barents, North Sea, and Norwegian Sea. The awards will be announced in January 2023.
- The construction of the Danish part of the Baltic Pipe project will be resumed after a 9-month halt caused by environmental issues. The pipeline, being developed by the Danish gas and electricity grid operator Energinet and the Polish gas transmission system operator Gaz‑System, will connect Poland to Norwegian gas fields and is expected to be fully operational by January 2023.
- Coal is making a comeback, at least temporarily. Several EU countries have put their coal phaseout plans on hold.
- The Czech government’s energy security commissioner said, “There is a temporary role for coal … But it will stay longer. We will need it until we find alternative sources. Until that time, even the greenest government will not phase out coal.”
- Bulgaria has called off its plans to build a large gas power plant. It plans to keep coal alive until a minimum of two new nuclear reactors have been built.
- The EU’s Timmermans said that countries could continue to use coal longer if they immediately move to renewables instead of gas. “It could still be within the parameters we set for our climate policy.”
- Germany, while not reopening its coal mines, intends to create strategic coal reserves, and the German energy network agency has asked for the country’s coal power plants to remain on standby, if needed.
Moody’s Investors Service summed up the disruption in a 17 March report, “The world energy market will need time to adjust to Russia’s exclusion from full free trade, and the global oil demand outlook depends heavily on the duration, magnitude, and macro effects of the Russian supply shock.”
