LONDON (Parliament Politics Magazine): Rising tensions along the Russia-Ukraine border have fuelled fears that Europe’s gas supply issue may worsen significantly. Prices on the gas market have already passed all-time highs, threatening to plunge European households into a cost-of-living crisis.
Russia is Europe’s major gas provider, with a third of the continent’s gas passing through Ukraine’s gas pipes. Over the last year, Russian gas shipments have been a quarter less than usual, but European officials are now concerned that a Russian invasion of Ukraine might result in an energy disaster if gas exports are curtailed.
The Biden government is ready to finalise a deal to “guarantee Europe can make it through the winter and spring” by attempting to negotiate a deal with major gas producing countries to export liquefied natural gas (LNG) by tanker to Europe, according to White House officials. It is not an easy plan to implement.
What is the source of Europe’s emergency gas supplies?
The search for spare gas shipments has been termed as “global” by US authorities.
However, the talks are likely to centre on Qatar, which is one of the world’s major producers of gas and the second largest LNG exporter after Australia. Qatar is a significant western friend in the Middle East, and it has for years provided super-chilled LNG to other European countries including the UK via tankers. Libya, with its significant gas output and proximity to the continent, may potentially be able to assist.
In addition, the United States may play a direct role in boosting Europe’s gas supplies. Over the last month, a record number of LNG cargoes intended for European ports have left the US, and the country has a significant long-term interest to push Europe to reduce its dependency on Russia – and the Nord Stream 2 pipeline project in the favour of the country’s own shale gas reserves.
How much emergency gas is needed in Europe?
Europe’s gas supply’s scale problem will be determined by how high Russian-Ukraine hostilities escalate.
Every day, Russia delivers an estimated 230 million cubic metres of gas to Europe, almost a third of which passes through Ukraine. However, market analysts disagree on whether Russia would block all gas deliveries to Europe or only those that rely on Ukraine’s gas pipelines. Others are doubtful that the Kremlin will ever limit Russia’s gas taps.
RBC Capital’s global head of commodities, Helima Croft said that it was difficult to plan the scenario on the amount of energy that would be disrupted. However, she explained that the question is not if the US could construct a backstop for Russian gas supply, but rather if it could acquire gas to help reduce any disruption.
