German energy ministry triggers stage 2 of 3-step gas supply alarm

Germany's energy ministry raised the alarm over gas supplies June 23 as the risk of Russian supply curbs intensifies.

The country's gas emergency plan has three levels and is now placed on level two, known as the alarm level. The final step in the plan is the emergency level.

The reason for raising the level is a curb in deliveries from Russia since June 14 coupled with consistently high prices on the gas market, the German ministry for economic affairs and climate protection said.

German gas storage is 58% full, but should deliveries via the Nord Stream 1 gas pipeline from Russia remain at only 40% of normal levels, it will not be possible to achieve the storage levels required for the winter months.

"Hence, we currently have a disruption of gas supplies that leads to a significant worsening of the overall supply picture, making this alarm level necessary," the ministry said in a statement.

Under new European Union rules designed to shore up supplies in the event of a disruption, EU storage facilities must be filled to 90% capacity by Oct. 1 each year in preparation for winter. Gas storage usually supplies 25%-30% of the gas the EU consumes in winter, the commission said.

Energy Minister Robert Habeck said the situation is serious, describing the curb in deliveries as an economic attack from Russian President Vladimir Putin.

Industry and households need to brace for further price increases, the minister added. "The filling of gas storage facilities now has top priority. We are working on alternative gas supplies and are building up the needed infrastructure with urgency," Habeck said.

The main priority should now be to cut the use of gas, said Habeck. "All users, in industry, public institutions and private households, should cut consumption where possible so that we can get through the winter."

Gas siphoned from the power sector will be replaced by coal, with standby power plants taken into operation.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.