Europe is looking to the rest of the world for energy as Russia tightens its grip on natural gas. Power plants that used to be coal-fired are being revived. Billions of dollars are being spent to bring in natural gas from Texas and other states. The heads of state and officials are traveling to several countries to sign energy deals.
Fears are growing that a cutoff of Russian gas will force governments to ration fuel and businesses to close factories, moves that could endanger thousands of jobs.
The search for fuel has been a success. The margin for error is thin as prices continue to soar and the Russian threat continues.
Michael Stoppard is vice president for global gas strategy at S&P Global.
Europe is in the grips of an accelerated and irreversible transition in how it gets its energy to heat and cool homes, drive businesses and generate power five months after Russia invaded Ukraine. A long-term switch to more renewable sources of energy has been overtaken by a short-term scramble.
The amount of natural gas coming from Russia is not as high as it used to be. European gas futures prices reached an all-time high this week as a result of the reduction in flows from Russia to Germany.
The European Union called for a cut in gas use within a day of the announcement.
The move away from Russian natural gas is sending shock waves through factories and forcing governments to look for alternative sources of energy.
The multipronged effort made up for the shortfall. According to Jack Sharples, a fellow at the Oxford Institute for Energy Studies, supplies of natural gas in Europe in the first half of the year have been the same as they were last year.
Liquefied natural gas, chilled to a liquid form and transported on ships has been the star performer. Europe's main source of fuel is piped gas from Russia, according to L.N.G. The United States has become the world's largest exporter of fuel.
European countries are pushing energy companies to fill salt caverns and other storage facilities with gas to make sure they don't get stranded if Russia shuts down the gas line.
Europe has increased its gas storage capacity by 10 percentage points over the last year. The European Union has a goal of 80 percent full before winter.
There are many reasons why the European effort could be short-lived.
Analysts say that Russia wants to disrupt the European Union's campaign to store enough gas to prevent a cutoff this winter. An extremely cold winter, a storm in the North Sea that knocks out Norway's gas production, and a busy Atlantic Hurricane season could cause Europe to experience energy shortages.
The vice president for gas said that they were close to the danger zone.
Natural gas has been used for years to extract iron from the water at a steel mill in Germany owned by ArcelorMittal. It used to buy metal inputs for its mill from a sister plant in Canada. Natural gas prices in North America are elevated compared to European prices.
Uwe Braun said that natural gas costs so much that they can't afford it.
Analysts and executives don't expect the situation to change in the near future. The winter may well prove to be a nail-biter with energy intensive industries under stress.
The news of plant closings or production cuts is starting to trickle in. High energy costs made the large aluminum plant in Romania uncompetitive, so the company is closing it and laying off 500 people.
The hardest blows are yet to come in some countries, such as Britain and Germany, where energy companies have yet to fully pass on the costs to their customers.
An explosion of household and industrial energy prices this winter is the biggest risk at the moment according to a political risk firm.
Liquefied natural gas is the main alternative to piped-in gas from Russia for a lot of the continent. Europe's appetite for L.N.G. may be hurting other parts of the world.
Asia, where China, Japan and South Korea are major customers, has been the focus of Europe's bidding. Ben van Beurden, chief executive of Shell, said on Thursday that Europe is taking L.N.G. away from markets that are not prepared to pay the prices that Europe may be prepared to pay. It's a very difficult position to be in.
Coal-fired electric power plants are being brought back or delayed in Germany and other countries. Reducing the amount of gas used at power plants to generate electricity and save it for essentials like home heating is the idea. The International Energy Agency predicted on Thursday that global coal demand this year would match its peak.
There are many uncertainties Liquefied natural gas is not available in Germany. It is not clear if any of the four L.N.G. processing vessels will be online quickly enough to help this winter.
It is possible that weather is also important in Europe and other parts of the world. The main market for L.N.G. is Asia, and a cold winter in Asia would make Europe more competitive.
It's difficult to see where large increases of gas would come from. Mr. Sharples of the Oxford Institute said that it would be hard to increase supply from other countries if we lost Russian supply completely.
There are more than one card. Until the gas crunch hit, the Dutch government set in place a plan to wind down the enormous Groningen field in the northern Netherlands because of local anger over earthquakes.
40 percent of Germany's annual consumption could be put back into the grid if the government woke up.
The Dutch government has decided to hold off on permanently closing the gas wells because of uncertainty, but it insists it will consider using Groningen only in the worst-case scenario, if people's safety is at risk.
The stance could be tested in the future.
The reporting was contributed byMelissa.
All Rights Reserved © 2024
