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Explainer-Where does Germany stand on gas supply?

Published 20/01/2023, 10:10
© Reuters. FILE PHOTO: A compressor station of the Jagal natural gas pipeline is pictured at a gas compressor station in Mallnow, Germany, June 13, 2022. REUTERS/Hannibal Hanschke
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By Vera Eckert and Christoph Steitz

FRANKFURT (Reuters) - Germany has been hit hardest by the de-facto end of Russian gas supplies to Western Europe, and while it is still too early to give the all-clear for Europe's top economy, a warm winter and brimming gas caverns have at least provided a breather.

Below are answers to the most urgent questions:

HOW HAS GERMANY RESPONDED TO THE LOSS OF RUSSIAN GAS?

Germany launched a multi-layered strategy to reign in demand and source alternatives following Russia's invasion of Ukraine and the subsequent decline in gas deliveries. Supply via the Nord Stream 1 pipeline halted in late August 2022.

Germany is now getting more pipeline gas from neighbouring Europe and Norway, buying liquefied natural gas (LNG) via existing European terminals, and constructing new LNG terminals on German coastlines, as well as achieving gas savings.

So far, there have been no supply emergencies or rationing. Industry has been paring back production to avoid sky-high gas prices.

Gas stocks are 89% full, enough to get Germany to the end of March even in a prolonged cold spell, according to most recent statistics, before re-filling starts in the April to September storage season.

Small Russian imports via Ukraine continue but are at constant risk of being curtailed.

HOW MUCH HAS IT COST?

Up to the end of 2022, state-lender KfW, which serves as the financial stabiliser of Germany's energy sector, spent 17 billion euros ($18 billion) on filling up gas caverns, 4 billion on buying LNG and 9 billion on buying gas from non-Russian sources.

WHERE IS THE GAS COMING FROM NOW?

Norway replaced Russia as Germany's top gas supplier in 2022, accounting for a third of imports. Belgium and the Netherlands also helped plug the gap.

Overall, Germany's natural gas imports were down 12% in 2022.

CAN LNG, FULL CAVERNS AVERT A CRISIS?

Germany has quickly advanced floating storage and LNG regasification units (FSRU) at four locations. In total, six such facilities are either in operation or being planned, five of which are chartered by Berlin.

Economy Minister Robert Habeck said this week that 14 billion cubic metres (bcm) of LNG a year can be received via the first three already, and this will double, going a long way towards lessening reliance on the roughly 55 bcm that Russia used to pump through Nord Stream 1.

Previous projections by the government and analysts were for a possible 30 bcm annual gap, representing one third of annual consumption.

Some argue the gap can be glossed over for now, if more hikes in intra-European flows and more savings are calculated in, and if optimistic assumptions regarding the weather hold true.

Storage operator association INES thinks so.

Its January monthly report said it will be possible to refill facilities for the 2023-24 cold season.

COULD DEMAND FROM CHINA THREATEN SUPPLY?

Germany can be optimistic about avoiding a gas shortage this winter according to the energy regulator, but it must keep saving gas, become more energy efficient and fill up its storages with an eye on the winter of 2023-24.

The International Energy Agency (IEA) has said a post-COVID demand recovery in China casts uncertainty over the global energy market, following on from warnings last month the EU could face gas shortages if the Chinese economy rebounds.

There will be big rivalries and possibly price wars around LNG cargoes while fixed land-based terminals that Germany plans to rely on long-term are a still few years away.

And European Union price caps on gas might work towards diverting cargoes away from Europe.

HOW IMPORTANT IS THE WEATHER?

The current winter season is mild now but temperatures can't be seriously predicted longer than two weeks in advance, let alone 12 months, providing sufficient uncertainty over where gas stocks will be at the end of March.

© Reuters. FILE PHOTO: A compressor station of the Jagal natural gas pipeline is pictured at a gas compressor station in Mallnow, Germany, June 13, 2022. REUTERS/Hannibal Hanschke

As a rule of thumb, Germany depletes its stocks by a rate of around 1% per day if temperatures fall below zero degrees, the regulator has said.

($1 = 0.9252 euros)

 

 

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