Everstream’s Intelligence Solutions expert Daniela Baron provides updates on key developments of the crisis as well as the latest data insights on energy storage levels in selected countries, government measures to mitigate the crisis, and impacts on manufacturing operations on the continent.
Situation Brief: Understanding Europe's Energy Crisis
August 18, 2002
Lesley Hume: Welcome to Everstream’s situation brief on understanding Europe’s energy crisis. Today’s brief is designed to give you insights and more detail on how the European energy crisis may impact your global supply chain network.
Joining us today is Daniela Baron, Intelligence Solutions Consultant based out of Cologne, Germany, one of my favorite cities by the way. We also really, really want this brief to be as interactive as possible. So please submit any questions in the Go To Webinar widget and we will get to as many as we can once Daniela’s finished, so with that, Daniela, over to you.
Daniela Baron: Great. So now that the technical issues are fixed, thank you, Lesley, and good morning. And good afternoon to everyone on the call. So today I’ll be walking us through the latest developments in the energy crisis in Europe.
First, I’ll give an overview of the latest disruptions to energy flows in the region. And then, secondly, I’ll provide a brief snapshot of some of the most recent government measures to address the crisis, and then afterwards, I’ll turn it back over to Lesley for the Q and A session.
Why don’t we start by talking about the most recent events impacting the energy flows first. The status of Gas flows from Russia has been making headlines for weeks and will very likely continue to dominate the conversation in the foreseeable future as well. One of the most notable disputes concerns the Nord Stream one pipeline. So Nord Stream One is a natural gas pipeline that runs under the Baltic Sea from Russia to Germany. Its gas flows have been disrupted for weeks as political tensions over sanctions against Russia escalated more and more.
And then following a complete shutdown for scheduled maintenance in July, the pipeline’s gas flows are currently only running at around 20% of total capacity. And it seems increasingly unlikely that the flows will increase in the future.
In fact, in their latest statement, the Russian authorities have again insisted that Western sanctions make the delivery of a turbine that is needed to complete the maintenance work impossible.
At the same time, Siemens Energy, the company responsible for the turbine maintenance, as well as the German government have repeatedly disputed these claims. And because of these disagreements, the turbine now essentially remains stranded at a Siemens production site here in Germany. And this is also where we expect the turbine to remain for the foreseeable future.
And then, at the same time, going forward, we also expect that the remaining gas flows via the Nord Stream 1 pipeline, will remain somewhat volatile, and could potentially dry up completely.
In the past, Russian authorities have claimed that at least one of the other turbines needed to keep the pipeline running, has defects and may need to be taken offline for repair works as well. So that opens the possibility to use it as a pretext to reduce the gas flows in the coming weeks or months.
While a lot of attention has been given to the disruptions to gas supply, oil deliveries have also become increasingly unpredictable in recent weeks.
The most notable event was probably the shutdown of the Druzhba Pipeline, which is one of the longest oil pipelines in the world.
Its southern leg delivers Russian oil products to refineries in Slovakia, the Czech Republic and Hungary via Ukraine, while its northern leg supplies Poland, and Germany via Belarus. Quite recently supply via the southern leg, was suddenly halted in early August, due to payment disputes related to EU sanctions.
And while deliveries to Hungary and Slovakia resumed on August 10 flows to the Czech Republic, remained halted, until August 12th, and effectively stopped the supply of all products from Russia to the Czech Republic for more than a week.
Although the supply has now resumed, at this point we do expect that supply will remain at risk of further disruptions.
Mainly because Transneft, a Russian state-controlled pipeline transport company has to pay monthly transit fees to the Ukrainian operator in advance to be able to use the pipeline. But the European Union has banned most transaction involving Russian state-owned companies already as part of their sanctions against the country.
While transactions involving transport of oil and gas were exempt for now, there’s obviously still the risk that as the conflict drags on longer, sanctions could be tightened, and disruptions could arise in the coming months again.
Let’s move on to the second topic I wanted to discuss today. As energy flows between Russia and Europe remained quite volatile, a lot of regional governments continue to draw up emergency plans, to try and mitigate the crisis impacts as much as possible.
Here in Germany, the government quite recently announced a gas levy. That will kick in on October 1, and that will, that is aimed at consumers, and it is meant to help address the additional costs for utility operators to replace imports from Russia.
Most media attention has been focused on the impact the levy will have on private consumers, but some regional industry bodies have also started coming out to say that the levy will very likely negatively impact business operations in many regions of the country as well.
And then, in France, although France is far less dependent on Russian energy imports, it is also continuing to face its own energy related problems.
More than half of its nuclear power plants remain offline for maintenance. And, at the same time, the recent heat waves, that many parts of Europe experienced this summer, intensified electricity demand in the country. But they also disrupted the generation of new power.
The state-run energy supplier, EDF, actually had to intermittently reduce output at some of its nuclear plants, because the heat waves pushed up water temperatures, nearby rivers, and then those rivers could no longer be used to cool the plants appropriately.
Measures are also being announced, or at least considered, outside of the European Union, although Switzerland is not an official member of the EU its government is currently considering joining the European Union’s plans to cut gas usage by 15% in the coming months to avoid shortages later in the year.
At the same time, in the United Kingdom, the government is reportedly working on emergency plans that could include power cuts to businesses, to consumers and even rail services. And in a worst-case scenario, blackouts of several days, may be implemented in January 2023.
And then, lastly, I do want to talk just briefly about Norway, which is one of Europe’s most important electricity exporters.
Traditionally, Norway has always been able to generate most of its own electricity needs from its hydro reservoirs but were still able to export excess hydropower electricity at a comparatively cheap price.
However, following a drier than usual spring, the water levels in at least some of these reservoirs, dropped way more than they normally would.
And the government has been under pressure to look into limiting the exports of electricity since last spring and may choose to eventually introduce a new law that could limit exports if water levels really do fall to extreme lows.
Then just to wrap this up, I do want to emphasize that most of the measures that I just described are proposals and considerations for now, but we do expect that, as winter gets closer, that, more governments will end up implementing binding measures to have to avoid domestic energy shortages in the winter.
Lesley Hume: That concludes our webcast, please visit our risk center at our website for more information. So with that, thanks so much for attending. Thanks, Daniela, once again, and everybody. have a great day.