31 December 2021

Breugel: Can Europe survive painlessly without Russian gas?

Russia has historically been the European Union’s largest supplier of natural gas. After the 2006 and 2009 Russia-Ukraine-Europe gas disputes, followed by tensions in the wake of the 2013-14 Ukrainian crisis, the EU has sought to reduce its dependency on Russian natural gas imports. However, Russia continues to supply around 40% of EU gas consumption (Figure 1).

As the threat of a Russian invasion of Ukraine intensifies, both the European Commission and the United States are looking at contingency plans in case of a further reduction or, in the worst-case scenario, a complete halt of Russian gas supplies to the EU.

Should this happen, could Europe replace Russian gas imports this winter and the next two winters? Whatever happens, the most efficient solution requires demand-side adjustments to reduce dependency on gas, rather than just replacing Russian gas with imports from another country.

Below, we lay out the gas supply situation this winter, then describe the challenges of a prolonged supply disruption before focusing on possible demand-side adjustments.

What if Russian gas supplies are halted until summer?

At the end of 2021 a dramatic picture emerged, with Europe’s gas balance for the winter strongly dependent on Russian supplies and moderate weather conditions. Up to now, three main factors have prevented a worst-case scenario: i) a strong increase in imports of liquefied natural gas (LNG): 80 terawatt hours (TWh) in the first 24 days of January 2022, compared to 60 TWh in the first 24 days of December 2021; ii) the ‘winter risk’ of exceptionally cold temperatures has not materialised; since Christmas average daily temperatures at Frankfurt airport have been 4.7°C, compared to the previous 10-year average of 3.1°C; iii) a continuation of contractual supplies by Russia, amounting to 18 TWh/week. As a result, on 24 January 2022, storage levels were 42% full according to GIE – AGSI, compared to 56% at the same time of the year between 2015 and 2020.

Looking ahead, there are three scenarios:

• If Russia and all other suppliers continue to supply at current levels, implying historically high levels of LNG imports, and natural gas demand remains in line with the 2015-2020 average, then EU-wide storage would hit a low of approximately 320 TWh in April 2022.
• If Russia cuts supplies at the beginning of February, storage would reach a minimum level of 140 TWh in April 2022.
• If, in addition to Russia cutting supply, the weather is extremely cold, then EU-wide storage will be empty by the end of March 2022.

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