EC eyes reduction in EU demand for Russian gas by two thirds before end-2022

The European Commission on March 8 unveiled new energy security proposals that seek to reduce European demand for Russian gas by two thirds by the end of 2022.

The proposals follow Russia's invasion of Ukraine, which has increased concern over Europe's energy supplies as well as the pressure to diversify its supply sources before next winter.

The EC said it also planned to make Europe independent from Russian fossil fuels "well before 2030", starting with gas.

In the shorter term, the EC said it would seek to diversify gas supplies, speed up the roll-out of renewable gases and replace gas in heating and power generation. "This can reduce EU demand for Russian gas by two-thirds before the end of the year," it said.

The EC said that with the measures in the new plan, "we could gradually remove at least 155 Bcm of fossil gas use, which is equivalent to the volume imported from Russia in 2021."

"Nearly two thirds of that reduction can be achieved within a year, ending the EU's overdependence on a single supplier," it said.

EC Executive Vice-President Frans Timmermans said Europe was too dependent on Russia for its energy needs. "It is not a free market if there is a state actor willing to manipulate it," Timmermans said.

"With the plan we outline today, the EU can end its dependence on Russian gas."

He said the EC's "Fit for 55" initiative launched last year would already allow the EU to reduce its total gas consumption by 30% by 2030 -- or 100 Bcm of gas Europe would no longer need.

"Now we'll take it to the next level. By the end of this year, we can replace 100 Bcm of gas imports from Russia -- that is two thirds of what we import from them," he said.

"This will end our over-dependency and give us much-needed room for maneuver. It's hard -- bloody hard -- but it's possible," he said.

Replacement volumes

Timmermans said the plan was based on two tracks -- diversified supply and more renewables gases.

"With more LNG and pipeline imports, we can replace 60 Bcm of Russian gas within the next twelve months," he said.

Of this, 50 Bcm would come from LNG and 10 Bcm from alternative pipeline suppliers, the EC said.

A further 3.5 Bcm could come by end-2022 from increased biomethane production, it said.

The remaining Russian gas replacement volumes by the end of the year would come from energy efficiency measures (14 Bcm) and renewable energy build-out (24 Bcm), it said.

The EC said it was engaged with a range of partners around the world to diversify supplies of gas. "The US, Norway, Qatar, Azerbaijan, Algeria, Egypt, South Korea, Japan, Nigeria, Turkey, Israel are among those countries," it said.

"This has resulted in record volumes of LNG imports in January and February," it said. "The EU has the potential to import a further 50 Bcm of LNG on a yearly basis."

Timmermans said sustainable production of biomethane could also be increased using the Common Agricultural Policy "to help farmers become energy producers."

The EC said doubling the objective of "Fit for 55" for biomethane would lead to the production of 35 Bcm/year by 2030.

"We can also increase the production and import of renewable hydrogen," Timmermans said. He said 20 million mt/year of hydrogen could replace 50 Bcm of Russian gas.

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Storage obligations

The EC also outlined measures to replenish gas stocks for the next winter and said it intended to present by April a legislative proposal on minimum storage obligations.

"The Commission will propose that by Oct. 1, gas storage in the EU has to be filled up to at least 90%," EU energy commissioner Kadri Simson said.

The low level of stocks across Europe and the need to refill them over the coming summer has contributed to record-high gas prices.

Day-ahead gas on the benchmark Dutch TTF hub was priced at Eur212/MWh on March 7, an all-time high and 230% higher than the start of 2022, according to Platts price assessments by S&P Global Commodity Insights.

European storage sites were filled to just 77% of capacity last summer, and storage facilities were just 27% full as of March 6, according to data from Gas Infrastructure Europe.

"The proposal would entail the monitoring and enforcement of filling levels and build in solidarity arrangements between member states," the EC said.

The EC said that pending the legislative process, member states should "act as if the legislation was already in place and take measures to ensure refilling of storage in time for next winter."

It added that member states could provide aid to suppliers to incentivize storage injections, for example in the form of guarantees

The EC said that in order to make storage more attractive to market participants, it would also propose to increase the rebate level to 100% as an incentive to refill storage sites.

"An EU gas storage policy will ensure fairness and allow making smart use of existing infrastructure, limiting the need for new infrastructure as not all member states have underground storage facilities in their territories," it said.

The new legal proposal will also set out a mechanism to ensure a fair allocation of security of supply costs.

"The benefits of having a guaranteed high filling level, in terms of the insurance value against security of supply risks and price dampening effects in winter, are not limited to the country where the storage is located," it said.

"In the light of the current geopolitical environment, the Commission envisages that this legal proposal will identify gas storage as a critical infrastructure and introduce provisions to tackle ownership risks for gas infrastructure," it said.

The EC also said it was continuing with its investigation into the gas market in response to concerns about potential distortions of competition by operators, notably Russia's state-controlled Gazprom.