Severe supply shock of natural gas in the European Union

Prevent a severe supply shock

The European Union agreed to ration its natural gas this winter to prevent a severe supply shock. On Tuesday, energy ministers of the EU agreed on a target to reduce gas usage by 15% between August and March of 2023. The reduction was against the country's average gas consumption during the same month over the previous five years.

Save Gas for a Safe Winter

Last week, the EU's plan called Save Gas for a safe winter unveiled the 15% target that induced a proposal for a new law. Over the past few days, some countries have pushed the bloc to make key concessions of varying levels of dependency on gas and also their level of storage.

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Gas networks

The EU will now exempt countries not connected to other members from the 15% mandatory demand reduction target. They won’t bale to free up significant volumes of pipeline gas to benefit other member states.

Several scenarios detailed by the Council as they would allow for the relaxation of the reduction target include states of gas storage that are particularly reliant on gas to power critical industries.

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Gas emergency

On Monday, Gazprom, Russia’s state energy company, shut down the gas turbine on the Nord Stream 1 pipeline for repairs, cutting flows of 33 million cubic meters from Wednesday. After Russia slashed exports in response to Western sanctions, gas flowed at 40% capacity.

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European benchmark

The European benchmark gas price rises to 10% on Monday over Friday. Flows through a pipeline transported last year were 40% of the bloc's total pipeline imports from Russia last year that slashed by two-thirds in June after Gazprom blamed the West for preventing the return of another turbine.

Gazprom reopened the Nord Stream 1 pipeline after ten days of routine maintenance. Moscow takes the opportunity to keep taps turned off in retaliation for sanctions imposed by Russia’s invasion of Ukraine.

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Bad timings

Imports of Russian gas were winding down, which will be no small feat for many EU countries that relied on Moscow's supplies to power their homes and industries. The EU quickly reduced its dependence on Moscow, which slashed Russian gas consumption by 66% before the end of the year.

High demand for gas combined with much-reduced Russian flows limits Europe's ability stores before it starts to drop in a few months. European countries fill their gas stores to 90% of their capacity as they will likely face supply disruptions by next year. Russia decides to cut off the gas deliveries from October.