Europe secures energy stocks to protect households from shortages

Originally published at Europe in Review on October, 2022

European governments have largely secured sufficient energy supplies to provide heating to their populations this winter, but they may struggle to protect small and medium-sized businesses and industrial output from the negative impact of higher fuel prices.

German natural gas facilities achieved 90 percent storage levels in September, despite Russian gas supply cuts, and should reach 95 percent by November – levels that indicate households should have sufficient heat even if rationing occurs. Italy has secured enough energy supplies from North Africa to compensate for the loss of Russian gas this winter. [DW] [Bloomberg] [SP Global]

French Prime Minister Elisabeth Borne said that her country was “ready” for the winter, provided consumers made efforts to reduce their energy consumption. France pledged EUR 16 billion to support household and small business energy relief in 2023 and to provide EUR 200 pay-outs to 12 million families this year. It will also limit electricity price increases for households and small businesses to 15 percent in 2023. [Bloomberg] [Barrons]

“Whatever happens, we’re ready for this winter. We anticipated this situation in advance,” Borne told parliament during a debate about the war in Ukraine. She claimed that prices would have risen 120 percent without government intervention. [Barrons]

Greek Prime Minister Kyriakos Mitsotakis said his country had taken action to secure sufficient energy supplies over the winter, adding that it had lined up sufficient cargoes of liquefied natural gas. Several power plants were ready to switch to oil from gas, and coal-fired capacity had been ramped up, he said.

Gloomy industrial forecast

Despite the improvement in energy supplies, the Organisation for Economic Co-operation and Development published a gloomy economic forecast for 2023 on September 26 – suggesting that Europe faces a very difficult economic climate if the energy crisis worsens, with winter temperatures likely to be a decisive factor.

With energy prices showing no sign of improving, industries and businesses are bracing for a difficult year. Companies are shutting plants and laying off workers, rather than paying exorbitant costs that make operations unprofitable. Economists expect joblessness to increase from 6.6 percent in August as the region’s economy falls into a recession around the end of the year. [MSN]

Factories from Germany and the UK to Spain, France and Slovakia have reduced operations or completely shut them down. Slovalco, a Slovak auto parts producer owned by Norsk Hydro, is shutting down rather than pay prices that have risen from EUR 45 per megawatt hour to EUR 1,000 in some locations. Other companies affected by higher prices include BASF, ArcelorMittal, Aluminium Dunkerque and CF Industries. [WSJ][Bloomberg] [Bloomberg] [NYT]

European metals trade association Eurometaux said that 50 percent of European zinc and aluminium production has been shut down. European chemical imports have doubled as it is cheaper to purchase abroad than manufacture domestically at current gas prices needed to operate factories. [Bloomberg][Eurometaux]

New pipelines

With Europe pushing ahead with its efforts to decouple its energy supplies from Russia completely, the continent’s leaders are rushing to open new pipelines and secure energy supplies from the Middle East and North Africa. Two major gas pipeline projects were completed and became operational in Europe in September, one in the north and one in the south.

Construction was completed on the Baltic Pipe from Norway to Poland via Danish waters and commissioned on September 27. It provides natural gas from the North Sea with a capacity of 10 billion cubic metres a year, equivalent to around a fifth of the capacity of the NordStream II pipeline from Russia to Germany. [Euronews]

A pipeline from Slovakia to Poland commissioned in late August is scheduled to begin operation in October. This will link Northern Europe with natural gas imported via pipelines from Central Asia and North Africa through Southern Europe, creating a European-wide natural gas network not centred on Russian supply. [EC]

The first LNG shipment to Germany is scheduled to arrive at a floating storage regasification unit (FSRU) in Brunsbuttel, Germany, in December. FSRU deliveries will continue until permanent onshore LNG terminals can be completed.

Suspected sabotage

As Europe rushed to secure energy supplies, the Nord Stream I and the NordStream II Pipelines suffered catastrophic damage from explosions described by NATO as sabotage. Both dual pipelines of NordStream I and one of two dual pipelines of NordStream II were ruptured. [[VOA](https://cpgfacultyoflawthammasatuniversity.createsend1.com/t/d-l-zliydkt-l-udt/)][reuters]](https://cpgfacultyoflawthammasatuniversity.createsend1.com/t/d-l-zliydkt-l-udi/) [Washington Post]

The damage will take years to repair, if indeed either the European or Russian side wishes to attempt it. The level of damage to the pipelines means that Russia no longer has the capacity to be the leading supplier of natural gas to Europe. Norway has become its largest single supplier, utilising North Sea fields.

Russian President Vladimir Putin accused the West of sabotaging the pipelines, a charge that has been vehemently denied by the United States and its allies. Putin claimed that the “Anglo-Saxons” in the West have turned from sanctions on Russia to “terror attacks,” sabotaging the pipelines in what he described as an attempt to “destroy the European energy infrastructure.” [NBC]

White House National Security Council spokeswoman Adrienne Watson shot back, saying: “We’re not going to let Russia’s disinformation distract us or the world from its transparently fraudulent attempt to annex sovereign Ukrainian territory.” [NBC]

NATO warned that it would retaliate for attacks against the energy infrastructure belonging to any of its 30 member nations. Norwegian Prime Minister Jonas Gahr Store said on September 30 that he had accepted help from Germany, France and the UK to protect Norwegian pipeline infrastructure.

The Italian government said that it would increase its naval presence in the Mediterranean to defend natural gas pipelines from North Africa against any Russian sabotage. [FT] [FT] [FT]

(rw-gc/pk)