Europe is Slowly but Surely Weaning Itself from Russian Natural Gas

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by | Oct 18, 2023

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Europe is slowly weaning itself from Russian natural gas. But Germany said it must expand its gas import infrastructure — to get more liquified natural gas. However, the continent and its associated manufacturing enterprises are in good shape heading into the winter heating season.

Germany is the continent’s most significant economic powerhouse, filling its natural gas storage to 96%. That’s a major turnaround from a year ago when the country scrambled to meet demand.

Still, “we don’t have any buffer in the gas system,” said RWE Chief Executive Markus Krebber to the news outlet WirtschaftsWoche. “If there is very cold winter or supply disruptions it can lead to very critical situations — and as a result to shortages and significantly higher prices.”

The story said that Germany uses floating storage units to replace the gas the Russians delivered via natural gas pipelines.

Indeed, Russian natural gas exports sent via pipeline will fall by 21 billion cubic meters this year — a six-fold drop from 2021 — according to the Russian state bank, VEB. In 2022, they were 131 billion cubic meters, and this year, they could be 100 billion cubic meters.

And Green Energy is Ticking Up

Meanwhile,  Europe is using energy-efficient technologies while increasing its green energy use. It also added 23 LNG import terminals, allowing ships to carry the frozen fuel to it before liquefying and piping it to where it is needed. To top it off, Europe bans Russian seaborne oil cargoes — a bonus for U.S. oil producers.

VEB said that Russia’s exports to China and India are increasing because they are getting the fuel cheaply. As a result, Russian sales will “recover” by 2026 — assuming China and India can expand their import infrastructure.

About three-quarters of all Chinese imports are tied to oil. It doubled its Russian oil imports to $10 billion in October 2022. China only gets 6% of its natural gas from Russia, mainly because the gas pipeline infrastructure is limited. Under any circumstance, the Asian giant is looking to get the best deal.

Meanwhile, India has gone from importing almost nothing to 1 million barrels daily of Russian oil. Both countries aim to be carbon neutral — a healthy pursuit attracting foreign investment to their shores.

But if Russia’s war on Ukraine is to end, the key is to cut off Russia’s funding. Russia is earning $500 million to $1 billion a day selling its oil and gas on world markets, used to bankroll its war against Ukraine. The war would stop if the world quit buying this oil, preventing untold death and carnage. BP, Shell, ExxonMobil, and Equinor have already pulled back.

The U.S. Embassy in Russia reports that Russian oil and gas revenues fell by 45% during the first quarter of 2023.

Wind and Solar Energy Surpass Natural Gas for Electricity Production

Luckily, Europe is accelerating its transition to clean energy to meet its Paris goals and to end its dependence on Russian gas. In 2022, wind and solar energy surpassed natural gas used to produce electricity. According to London-based think tank Ember, renewable power comprised 22% of the 27-member European Union’s electricity mix.

By comparison, natural gas provided 20%.

“We have to double down on investments in home-grown renewables,” European Commission President Ursula von der Leyen said in October 2022. “Not only for the climate but also because the transition to the clean energy is the best way to gain independence and to have security of energy supply.”

The think tank said solar generation grew by 25% in 2022, and 22 of the 27 countries had their most extensive solar years ever. For example, Greece ran entirely on renewable power for several hours in October 2022.

Notably, Ukraine has Europe’s third highest natural gas reserves, behind Norway and the United Kingdom, with 905 billion cubic meters. It produced 70 billion cubic meters in the 1960s and 1970s, falling by more than half in 1991 when Russia shifted production to Siberia. Now it is less than 20 billion cubic meters, with Naftogaz accounting for 75%-80% of that, Naftogaz said. With an end to war and more foreign investment, Ukraine could achieve energy freedom and eventually help supply Europe with natural gas.

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