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Europe scrambles to address gas crisis

By Angus McNeice in London | chinadaily.com.cn | Updated: 2022-08-01 07:23

Sanctions disrupt supply

Nord Stream 1 generally supplies about 40 percent of Gazprom's gas delivery to Europe via a pipeline that runs beneath the Nordic Sea. At the beginning of June, five turbines ran at full capacity, but a series of pay disputes and turbine issues sent capacity fluctuating, from 85 percent in mid-June, to 40 percent at the beginning of this week, with a brief maintenance period in between, when no gas ran through the pipeline.

One of two functioning turbines was due to be taken off line for maintenance this week, and replaced with a newly-serviced turbine. However, the replacement did not arrive on time, meaning capacity dropped to 20 percent on Wednesday.

Nord Stream 1 turbines are made by German company Siemens and serviced in Canada. Sanctions in place due to the Russia-Ukraine conflict have delayed repair and return of a turbine that was expected back in May, according to Gazprom.

A key issue is how quickly Europe can substitute supply. The EU imports 47 percent of its gas and 25 percent of its oil from Russia. Put another way, the bloc imports more than one-quarter, or 26 percent, of its energy from Russia.

Von der Leyen said she is in talks with Qatar, Algeria, Egypt, and Azerbaijan over increasing fossil fuel imports, and, meanwhile, both Norway and the US have significantly upped supply.

Authors of the IMF paper estimate that Europe could replace up to 70 percent of Russian gas imports with alternatives for a period of six months. However, a longer full shut-off would likely produce very high prices and significant shortages in some countries. Hungary, Slovakia and the Czech Republic could face shortages equivalent to 40 percent of gas consumption and GDP shrinkage of up to 6 percent, according to the IMF paper.

Climate pledge at risk

To minimize gas use in the power sector, the IEA's Birol said that European nations will have to temporarily increase coal and oil-fired generation.

At the United Nations Climate Change Conference, or COP26, in Glasgow last November, UN member states agreed to phase down use of coal. Clifford Chance's Evans expects that these efforts will be put on hold.

"Some fossil-based substitute for Russian fossil fuel is needed, especially for industrial uses that will take longer to decarbonize," Evans said.

Europe's thirst for new sources of fuel has already created a "global gold rush for new fossil gas production", according to the Climate Action Tracker.

Canada has plans to fast-track new LNG projects, domestic production has increased in the US, Norway, Italy and Japan, and Nigeria has revived old gas pipeline projects, while Senegal is seeking to export gas to Europe for the first time.

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