Next few months to be 'critical' for European gas preparedness: IEA's Birol
The next few months will be "critical" for Europe to build up sufficient gas stocks to make it through the upcoming winter given uncertainty over Russian gas supplies, the head of the International Energy Agency said July 18.
In a new commentary, IEA executive director Fatih Birol said an additional 12 Bcm of gas needed to be saved in the next three months that could then be stored across the EU to bolster stocks.
EU gas storage sites are currently 64% full, but Birol warned that the EU would need to reach a level of more than 90% should Russia cut supplies to Europe from the start of the heating season in October.
"And even then, it could still face supply disruptions in the latter part of the heating season," Birol said.
"Achieving that 90% storage level is still possible, but Europe needs to act now and make every remaining day count," he said.
Under new EU storage rules, member states must ensure their gas storage sites are filled to an average 80% of capacity by Nov. 1, 2022, and to 90% by Nov. 1 in subsequent years.
However, the EC has said in a draft winter preparedness communication that without demand reduction measures, EU stocks could be filled to just 65%-71% of capacity in the event of a full Russian supply halt.
Birol warned that if Russia decided to completely cut off gas supplies before Europe can get its storage levels up to 90%, the situation would be "even more grave and challenging."
Birol said the first immediate step toward filling European gas storage to adequate levels before winter was to reduce Europe's current gas consumption and to put the saved gas into storage.
"Some of this is happening already because of sky-high gas prices, but more is required," Birol said.
Concerns over storage have seen European gas prices remain at sustained highs through 2022.
The Dutch TTF month-ahead price hit a record Eur212.15/MWh on March 8, according to Platts price assessments by S&P Global Commodity Insights, and was last assessed at Eur159.50/MWh on July 15, up by 86% since the start of 2022.
Birol said significant additional demand reductions were needed to prepare Europe for a "tough" winter ahead.
He said 12 Bcm of additional gas savings represented some 130 LNG tankers. "This is a big ask, but it does not exaggerate the scale of what is needed," he said.
Birol said it was "categorically not enough" to rely on gas from non-Russian sources.
"These supplies are simply not available in the volumes required to substitute for missing deliveries from Russia," he said.
Birol said that would be the case even if gas supplies from Norway and Azerbaijan flowed at maximum capacity, if deliveries from North Africa stayed high, if domestic output followed recent trends, and if inflows of LNG increased at a similar rate as the first half of 2022.
"That is already a lot of 'ifs'," Birol said.
To encourage gas saving, Birol unveiled a five-point plan that the EU could follow.
First, he said the EU should introduce auction platforms to incentivize EU industrial gas users to reduce demand.
"Industrial gas consumers can offer part of their contracted gas supply as demand reduction products for compensation, which can lead to efficiency gains and a competitive bidding process," he said.
Such a process has also already been outlined in the draft EC communication that is due to be officially proposed on July 20.
The second point is to minimize gas use in the power sector, which could be done by temporarily increasing coal- and oil-fired generation while accelerating deployment of low-carbon sources, including nuclear, Birol said.
The third point in the plan is to enhance coordination among gas and electricity operators across Europe, including on peak-shaving mechanisms, to help reduce the impact of lower gas use on power systems.
Fourth, Birol said, would be to bring down household electricity demand by setting cooling standards and controls, and finally the EU should harmonize emergency planning across the EU at the national and European level.
"If these types of measures are not implemented now, Europe will be in an extremely vulnerable position and could well face much more drastic cuts and curtailments later on," he said.
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