March 25, 2023

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The gas crisis could worsen next year in Europe, after using reserves in the winter

Europe could face an even more acute energy crisis next year after it uses natural gas reserves to weather this winter’s cold, the head of the International Energy Agency (IEA) said on Wednesday, reports Reuters.

European countries filled storage tanks to about 90 percent of their capacity after Russia cut off gas supplies in response to Western sanctions imposed following its invasion of Ukraine.

Gas prices, which rose in the months after the February invasion, retreated. But this could be short-lived as countries compete to buy liquefied natural gas (LNG) and other alternatives to gas supplies through Russian pipelines.

To help combat the crisis, the European Union is considering a gas price cap, an issue that has divided the 27-nation bloc as some countries fear it could make it harder to secure supplies.

“With gas storages almost 90% full, Europe will survive next winter with only a few bruises, as long as there are no political or technical surprises”, said Fatih Birol, Director General of AIE.

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The real challenges facing Europe, which in the past relied on Russia for about 40% of its natural gas, will start in February or March, when storages need to be refilled after high winter demand has depleted them to 25% -30%

“This winter is difficult, but next winter can be very difficult,” Birol told journalists in Finland.

European governments have taken steps to protect consumers from the impact of higher prices, and on Wednesday Germany said it would subsidize next year’s energy bills by paying just under 13 billion euros in user fees charged by the four companies that manage grids. high voltage transmission.

The tariffs are part of electricity bills, accounting for around 10% of total costs for retail customers and a third for industrial companies in sectors such as steel or chemicals.

Berlin’s intervention stabilizes tariffs, which would otherwise have tripled, given high wholesale energy prices and rising operational costs for grid operators, German Economy Minister Robert Habeck said.

Until the outbreak of the war in Ukraine at the end of February, the Nord Stream 1 pipeline under the Baltic Sea, which stretches from Russia to Germany, was one of the main sources of gas in Western Europe.

Nord Stream 1 comprises two separate pipelines, as does Nord Stream 2, which was filled with gas but was never allowed to deliver to Europe because Germany suspended the permit just before Russia invaded Ukraine on February 24.

Three of the four pipelines were disabled by what the West and Russia say was sabotage that caused huge leaks, and Danish authorities said the fourth was depressurized on Tuesday.

Sabotage at Nord Stream?

President Vladimir Putin blamed the United States and its allies on Friday, accusations rejected by Washington.

Russia condemned what it called “stupid” Western theories that it had sabotaged the pipelines with explosions last week.

The Kremlin said on Wednesday that Russia must participate in investigations into the incidents, while one of Putin’s allies said he remembered the US Central Intelligence Agency’s attacks on oil infrastructure in Nicaragua in 1983.

For her part, the head of the European Commission, Ursula von der Leyen, said that EU countries must improve their protection of critical infrastructure by conducting stress tests and using satellite surveillance to detect potential threats.

She spoke in the European Parliament ahead of the meeting of the leaders of the 27 EU countries in Prague on Friday, when they will debate the EU’s plan to cap prices.

The details have not yet been worked out, but the idea has the support of most countries who see it as a way to deal with inflation.

However, it has faced opposition from Germany, Denmark and the Netherlands, which express concern that it will make it harder to secure supplies.

Von der Leyen said in his speech that countries should also start buying gas jointly to avoid EU member states bidding against each other on world markets and leading to even higher prices.

Earlier tensions in the gas market eased as Russian energy company Gazprom resumed gas exports to Italy via Austria on Wednesday after resolving a warranty issue that had led to the suspension of deliveries over the weekend.

However, Deputy Prime Minister Alexander Novak said on Wednesday that Russia may cut oil production to offset the negative effects of price caps imposed by the West because of Moscow’s actions in Ukraine.

The price cap plan agreed to by the Group of Seven rich nations of the world requires participating countries to refuse insurance, financing, brokerage, shipping and other services for petroleum commodities priced above a price ceiling for crude oil and petroleum products that has not has yet to be determined.

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