Thursday, April 28, 2022

HOW RELIANT IS THE WORLD ON RUSSIA FOR OIL AND GAS?

 BBC News 27 April 2022 - by Jake Horton, Daniele Palumbo & Tim Bowler

Fuel prices have soared since Russia's invasion of Ukraine

Russia says it's no longer supplying gas to Poland and Bulgaria after the countries refused to pay for their supplies in roubles.

The EU has said it considers the move to be a form of blackmail.

What has happened?

Despite the invasion of Ukraine, Russia has continued to supply a large amount of gas to many European countries.

However, after Western powers placed financial sanctions on Russia, President Putin announced that "unfriendly" countries would have to pay for gas in Russian currency.

The Russian-state-owned energy company Gazprom has said it has cut off supplies to Poland and Bulgaria and will not restart these until payments are made in roubles.

EU Commission president Ursula von der Leyen has warned European energy providers against complying with Russian demands, saying that this would most likely be a breach of EU sanctions.

How much gas does Russia supply to Europe?

In 2019 Russia accounted for 41% of the EU's natural gas imports.

Russia gas exports

If Russian gas supplies to Europe dried up, Italy and Germany would be especially vulnerable as they import the most gas.

Russia only provides about 5% of the UK's gas supplies, and the US doesn't import any Russian gas.

Russia sends gas to Europe through several main pipelines. The gas is collected in regional storage hubs, and then distributed across the continent.

Europe gas pipelines

Poland's gas storage is currently 76% full, but Bulgaria's sits at just 17%.

"This is not a short-term issue, the problem will be next winter, so it is key to replenish storage," says energy policy research analyst Simone Tagliapietra.

What are the alternatives to Russian gas?

Bulgaria says it is looking to increase the amount of gas it receives from Azerbaijan, as well as making deals with Turkey and Greece.

Poland is building a new pipeline connecting it to Norway's gas fields, which is set to be complete in October 2022, and is ramping up supply from neighbouring Lithuania.

Poland's deputy foreign minister told the BBC there were "options to get the gas from other partners," including the US and gulf nations.

Europe could turn to existing gas exporters such Qatar, Algeria or Nigeria, but there are practical obstacles to quickly expanding production.

Research analyst Ben McWilliams says: "It's harder to substitute gas because we have these big pipes that are taking Russian gas to Europe."

The US has agreed to ship an additional 15 billion cubic metres of liquified natural gas (LNG) to Europe by the end of this year.

The aim is to supply 50 billion cubic metres per year of additional gas until at least 2030.

Europe could also ramp up the use of other energy sources, but doing so is not quick or easy.

wind turbineIMAGE SOURCE,GETTY IMAGES
Image caption,
The EU hopes to massively boost its use of renewable energy, including wind power

"Renewables take time to roll out so in the short term this is not a solution," says Mr Tagliapietra.

"So for next winter - what can make a difference is fuel switching such as opening up coal-fired power plants, as Italy and Germany have plans to do in case of an emergency."

The EU has proposed a plan to make Europe independent from Russian fossil fuels before 2030 - including measures to diversify gas supplies and replace gas in heating and power generation.

What sanctions are there on Russian oil and gas?

The UK is to phase out Russian oil by the end of the year and the EU is reducing gas imports by two-thirds.

Russia has warned banning its oil would lead to "catastrophic consequences for the global market".

Oil and gas prices have both risen since the invasion of Ukraine.

How much oil does Russia export?

Russia is the world's third biggest producer, behind the US and Saudi Arabia.

Oil producers top 10

Of about five million barrels of crude oil it exports each day, more than half went to Europe, before sanctions were announced.

Russian imports accounted for 8% of total UK oil demand and 3% of US demand.

In early April, Russian oil production had dropped by 700,000 barrels a day, according to the IEA.

The IEA says the decline could reach 1.5 million barrels a day by the end of the April, and about three million from May.

This follows European buyers seeking alternative suppliers, and the US banning Russian oil imports altogether in early March.

Russia may try to find new markets for its oil in Asia or elsewhere, but if the drop in production continues, it could eventually impact the country's economy.

What about alternative oil supplies?

Mr McWilliams says it should be easier to find alternative suppliers for oil than for gas, because while some comes from Russia, "there's also a lot of shipments from elsewhere".

Some IEA members have released the equivalent of 120 million barrels from oil stocks - the largest stock release in its history.

US President Joe Biden ordered a major release of oil from America's reserves in an effort to bring down high fuel costs.

The US also wants Saudi Arabia to increase its oil production and is looking at relaxing sanctions on Venezuela's oil.

What will happen to my heating and fuel bills?

Consumers will face rising energy and fuel bills as a result of this war.

Heating prices - which are already high - are likely to increase even more if the flow of Russian gas into Europe is restricted.

In the UK, household energy bills have been kept in check by an energy price cap.

But bills rose £700 to about £2,000 in April when the cap was increased. They are expected to reach about £3,000 when the cap is increased again this autumn.

woman and radiatorIMAGE SOURCE,GETTY IMAGES
Image caption,
Heating bills are set to rise sharply this year in the UK

UK petrol and diesel prices have also soared, and the government has now announced a cut in fuel duty as motorists struggle with record prices.

"I think if we're in a world where Russian oil and gas stop flowing to Europe then we're going to need rationing-style measures," says Mr McWilliams.

"Part of the conversation now is, can we tell households to turn their thermostats down one degree, which can save a significant chunk of gas."