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Berlin, Paris and Madrid unveil plans to cope with energy crunch

Nord Stream 1 pipeline Thomson Reuters/Hannibal Hanschke
The landfall facilities of the Nord Stream 1 gas pipeline in Lubmin, Germany. The line was shut almost three weeks ago
  • European governments reveal strategies for the winter months
  • Chancellor Olaf Scholz of Germany to visit Gulf this weekend
  • Politicians issue warnings about potential power cuts and recessions

European governments have outlined new measures to cope with potential energy shortages this winter and improve networks so they can share power, as the war in Ukraine continues to affect gas flows from Russia.

On Monday, Spain unveiled plans that could force energy-intensive industries to shut at peak demand times; France said it was preparing to send gas to Germany from October; while Berlin said it was still in talks about state aid for ailing utility giant Uniper.

Berlin also announced that Chancellor Olaf Scholz will travel to Saudi Arabia on Saturday for a two-day visit to the Gulf. He is scheduled to meet the president of the United Arab Emirates, Sheikh Mohamed bin Zayed Al Nahyan, on Sunday, before heading to Qatar for talks.

On Monday, German buyers briefly reserved capacity to receive Russian gas via the Nord Stream 1 pipeline, once one of Europe’s major gas supply routes, for the first time since the line was shut almost three weeks ago. But they soon dropped the requests.

It was not immediately clear why the Germans had submitted requests when Moscow has given no indication that the line will restart any time soon.

Russia, which had supplied about 40 percent of the European Union’s gas before its invasion of Ukraine in February, has said it closed the pipeline because Western sanctions hindered operations. European politicians say that is a pretext and accuse Moscow of using energy as a weapon.

European gas prices have more than doubled since the start of the year. Gas flows to Europe via Ukraine have continued, although much reduced.

The sharp drop in Russian fuel exports has left governments scrambling to find energy resources, but also to issues warnings about power cuts and recession.

The German economy is contracting already and will likely get worse over the winter months as gas consumption is cut or rationed, the country’s central bank said on Monday. It added that the economy was likely to shrink, even if outright rationing was avoided, as companies reduce or halt production.

After Scholz’s trip to the Middle East was announced, German energy company RWE confirmed that it is still in talks with Qatar about further supplies of liquefied natural gas.

“We have had a good business relationship with Qatar for many years. Since the last visit of the German government, which we have taken part in, we have been in good and constructive talks about further LNG deliveries,” the company said.

German Chancellor Olaf Scholz – pictured in Potsdam on September 15 – will visit Saudi Arabia, the UAE and Qatar this weekend. Picture: Bernd von Jutrczenka /Pool via Reuters

In France, exports of natural gas to Germany could start around October 10, the head of France’s CRE energy regulator said, following an announcement by President Emmanuel Macron that the two EU neighbours would help each other with electricity and gas flows.

“Gas was [until now] only flowing from Germany to France, so we did not have the technical tools to reverse the flows and we did not even have a method to regulate prices,” CRE chief Emmanuelle Wargon told Franceinfo radio.

French energy group EDF is racing to repair corrosion-hit nuclear reactors, but “exceptional” measures this winter could include localised electricity cuts if the winter is cold and EDF’s plans are delayed, Wargon said.

“But there will be no gas cuts for households. Never,” she added.

Reyes Maroto, Spain’s industry minister, said that obliging energy-intensive companies to close down during consumption peaks is an option on the table this winter.

The companies would be compensated financially, she said in an interview with Spanish news agency Europa Press, adding there was no need to impose such closures now.

In Finland, consumers were warned they should be prepared for power outages.

“As a result of great uncertainties, Finns should be prepared for power outages caused by a possible power shortage in the coming winter,” national grid operator Fingrid said.

Reflecting the disruptions caused across the continent, Finnish power retailer Karhu Voima said it had filed for bankruptcy.

Coal imports rise as Europe goes ‘back in time’

Europe’s imports of thermal coal in 2022 could be the highest in at least four years and may rise further next year, analysts said on Monday.

Imports of thermal coal this year could rise to about 100 million tonnes, the highest level since 2017, according to Noble Resources International, while commodities pricing agency Argus expects shipments to reach a four-year high.

“Europe is going back in time,” Rodrigo Echeverri, head of research at Noble, told a conference.

Meanwhile oil prices fell by more than 1 percent on Monday, pressured by expectations of weaker global demand and by U.S. dollar strength ahead of a potentially large interest rate hike, though supply worries limited the decline.

Oil has also come under pressure from forecasts of weaker demand, such as last week’s forecast from the International Energy Agency that there will be zero growth in demand during the fourth quarter.