Gasunie's response to the loss of Russian gas

Over the year under review, the security of gas supply in the EU came under unprecedented pressure due to the reduction in natural gas being supplied by Russia. In the years prior to the Covid-19 pandemic, Russia was supplying around 200 bcm of the approximately 500 bcm of annual market demand for natural gas. In the summer of 2021 it became clear that Russian gas suppliers were not making any effort to replenish their own stock levels in European gas storage facilities. They also gradually stopped offering short-term gas contracts.

This turned out to be the prelude to the Russian invasion of Ukraine in February 2022. The invasion led to a growing number of EU and US sanctions against Russia and the Russian regime and the provision of tangible support to Ukraine. This, in turn, induced Russian gas suppliers to breach their long-term supply contracts with EU countries and energy companies for the first time in history by putting the squeeze on the supply of gas or even turning off the gas taps completely. In September 2022, sabotage of Nord Stream 1 made the supply of gas over this pipeline impossible; the supply had, however, already stopped in the weeks prior to this due to reported ‘compressor problems’ on the Russian side.

As a result of these developments, and with additional gas imports from non-Russian suppliers starting up, the traditional direction of the international flow of natural gas in Europe from East to West has now changed to West to East. As a result, the Netherlands received significantly larger gas volumes from the UK and Belgium and through the import of LNG. Germany saw its supplies from Norway and the Netherlands increase sharply.

In July 2022, GTS published an analysis showing what the consequences of going an entire year without Russian gas would likely be. This analysis shows that there need not be a gas shortage in the Netherlands in the winter of 2022-2023. It also shows that the Netherlands would still be able to deliver the maximum (physically possible) export volume to Germany. This is all provided that a number of conditions are met, i.e.:

• There is a doubling of the Dutch import capacity for LNG, which must be realised before the start of the new gas year (October 2022).
• The Dutch gas storage facilities are filled to 80%, to be achieved before the start of the new gas year.
• Maximum use is made of the LNG terminals in the Netherlands, Belgium and the UK.
• There is a stable import flow of gas from Norway to the EU.
• There is also a supply from the Groningen gas field (minimum flow) and the small gas fields.
• Use is made of virtually the full capacity of coal-fired power stations in the Netherlands.
• We see a significant reduction in demand.
• The winter season has average temperatures.

These conditions were met in the first three months of the gas year, with the result that the Netherlands did not have an actual gas shortage in the winter of this gas year. There has been virtually no supply of Russian gas to the EU since the summer and, with the failure of the Nord Stream pipeline, the supply of Russian gas is not expected to resume for the time being. This means the scenario as described by GTS in July has become a reality. 

The loss of Russian gas flows is causing continuing scarcity in north-western Europe compared to the pre-Covid consumption level, which is reflected in high wholesale gas prices. This is having major financial consequences for consumers and businesses. Based on data on gas consumption and current prices, GTS expects 20 to 25% less gas to be consumed in 2023. This reduction in demand is partially the result of energy savings on the part of consumers; however, it is, to a large extent, also due to demand destruction in the business community. 

If the winter of 2023/2024 turns out to be a cold one, this increases the chance of there being an actual gas shortage, and this given the fact that there will be even less Russian gas available in 2023 than in 2022. This means that measures are needed to ensure a stable, enduring improvement to the supply/demand balance in our market area. This requires both a sustained increase in supply and a continuation of the current significant reduction in demand.

Netherlands

At the end of March 2022, the European Commission presented a proposal to require EU Member States with gas storage facilities to have these largely filled before winter. The objective is to become less vulnerable to the impact of reduced supply from non-EU countries, especially Russia. To ensure that the Netherlands was as well prepared as possible for the winter and to become less dependent on Russian gas, at the request of the Dutch government the storage facilities were filled higher than usual last year. Dutch storage facilities were at 77% of maximum fill capacity at the end of 2022, compared to 36% at the end of 2021.

Germany

In April 2022, the German economy ministry BMWK asked the nationwide market area manager Trading Hub Europe (THE) to procure and store, in German storage facilities, the equivalent of 10 TWh in LNG. The federal government also passed new legislation to ensure that German gas storage sites are filled before next winter. The law also imposes obligations on THE and on storage facility operators and their customers. Following discussions with the German government, loans from state-lender Kreditanstalt für Wiederaufbau have given THE the financial means to sign agreements with storage facility customers and procure gas itself to ensure that the storage capacity is filled. German storage facilities were at 91% of maximum fill capacity at the end of 2022, compared to 50% at the end of 2021. 

EemsEnergyTerminal and Gate terminal

To reduce dependence on gas from Russia, in 2022 Gasunie and its partners doubled the annual LNG import handling capacity in the Netherlands, from 12 bcm to 24 bcm. They managed this by expanding the capacity of the existing Gate terminal in Rotterdam (50% Gasunie, 50% Vopak) to 16 bcm and by constructing the temporary EemsEnergyTerminal (EET) in the port of Eemshaven, adding another 8 bcm in capacity. In 2022, Gate customers fed 14.4 bcm of gas into the GTS grid (2021: 7.1 bcm).

German LNG

As a result of the war between Russia and Ukraine, the German Ministry for Economic Affairs and Climate Action has launched several initiatives to directly increase LNG supplies to Germany in the short, medium and long term. This includes the construction of two permanent onshore LNG terminals – one in Brunsbüttel and one in Stade, to be commissioned in 2026, and temporary floating LNG terminals in Wilhelmshaven, Stade, Brunsbüttel and Lubmin, to be commissioned in 2023.

On 4 March 2022, Gasunie, Kreditanstalt für Wiederaufbau (KfW, on behalf of the German government) and RWE signed a letter of intent for the joint construction of the onshore LNG import terminal in Brunsbüttel. The terminal will have an annual throughput of at least 8 bcm with a possible expansion to10 bcm.

Gasunie subsidiary German LNG will manage the terminal on completion. The licensing procedure is already underway. ConocoPhillips, INEOS and RWE Supply & Trading are the first customers in line to formally sign up for capacity at the terminal. The intention is to design the LNG terminal in Brunsbüttel in such a way that, eventually, green hydrogen or hydrogen carriers such as ammonia can be imported. No final investment decision has yet been taken for the German LNG terminal.

Other LNG initiatives

In addition, the German Ministry for Economic Affairs and Climate Action has commissioned Uniper and RWE to charter FSRUs for Germany, to be berthed at Wilhelmshaven, Stade and Brunsbüttel. As a network operator, GUD must quickly build pipelines to connect the FSRUs in Brunsbüttel and Lubmin and the onshore terminal in Brunsbüttel to the gas transmission network. The investments have been approved by German regulator BNetzA and, accordingly, will become part of GUD’s regulated asset base. 

To keep the market and society up to date on the security of gas supply, GTS has developed a dashboard, updated daily, that presents information from public sources in a clear, orderly manner. This dashboard shows the individual and total stock levels at the Dutch seasonal gas storage facilities, the gas consumption in the Dutch market, the supply of gas for Europe, gas transport to and from Germany and Belgium, and the volume of LNG imported to the Netherlands. All this information is also published weekly on the Dutch government website.