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Europe could cut Russian gas imports by over a third in a year, IEA says -Breaking

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© Reuters. FILE PHOTO – A worker inspects pipes at the Yamal Europe pipeline station near Nesvizh. It is located 130km (81 mi) south of Minsk, December 29, 2006. REUTERS/Vasily Federosenko

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Susanna Twidale and Kate Abnett

LONDON/BRUSSELS – Europe could reduce Russian gas imports more than a quarter of a century, according to the International Energy Agency (IEA), in its 10-point plan for reducing dependence on Russia.

Russia supplies 40% of Europe’s gas, and is the largest source of supply. But, the Russian invasion in Ukraine raised concerns over this dependence as well as the risk of disruptions to the supply chain.

Fatih Birol (executive director), a Paris-based agency that represents 31 industrialised countries, but not Russia, stated, “Russia’s use its resources as an economically and political weapon shows Europe must act quickly to avoid significant uncertainty over Russian gas supplies next year.”

Moscow has denied using gas for weapons. Gazprom, the state-run company that controls Russian gas exports via pipeline, (MCX:) claims that it has satisfied all long-term contracts. Clients confirm this despite flows dropping in 2021.

Russian gas delivery has been steady since Russia’s invasion of Ukraine last week. Moscow refers to this as a “special opera”; however, prices continue to rise in a market already tightened by the conflict.

This Thursday’s record-breaking Dutch front month gas price was 199 euros per megawatt hour ($220). It was less than 16 euro a year prior.

The IEA estimated that Europe could acquire approximately 30 billion cubic metres of gas per annum – around 20% less than Russia, Qatar and other countries.

Qatar said that Russia supplies cannot be replaced by any other country.

The IEA stated that European nations shouldn’t sign gas deals with Russia and should instead establish minimum storage requirements and speed up new wind or solar power projects.

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The report also recommended more energy efficiency measures. It suggested that consumers lower their thermostats to 1° Celsius. This move could help save around 10 bcm per year.

The IEA stated that “all of these measures could decrease the European Union’s Russian gas imports by more than 50 million cubic metres or over one-third within a single year.”

Analysts claim that Europe’s pipeline and LNG infrastructure might be able to handle enough gas from Russia in theory. But, the reality is that this will only work if there are global liquefaction capacities.

The European Commission will offer new measures to decrease dependence on Russia, as well as help with supply shocks. These include ensuring gas storage is at a minimum level prior to winter, and accelerating the deployment of renewables.

EU officials are also working to find new ways to address climate change. They see renewables use as an effective way to reduce EU dependency on oil and could decrease EU gas dependence by up to 23% in 2030.

However, these measures would not solve a temporary supply shortage.

The IEA recommended short-term actions such as redirecting windfall profit made by energy companies from high gas prices to help customers who are facing rising bills.

It is possible that the European Commission would propose taxing windfall profits from energy companies in order to encourage investment in renewables as well as compensate consumers.

($1 = 0.9038 euros)

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