Yakov & Partners: Europe will not be able to spend the winter without gas from the Russian Federation without reducing the economy

The gas deficit in Europe without Russian gas and with a mild winter will be at least 10 billion cubic meters, while maintaining record volumes of LNG imports, full consumption of gas from storage facilities and maintaining reduced consumption, the consulting company Yakov and Partners (the former Russian division of McKinsey) predicts. Analysts believe that in order to get through the winter, Europe will need to reduce consumption by 7-12 billion cubic meters, which is possible only with a complete or partial shutdown of a number of industries.

By mid-September, Europe managed to achieve a high level of occupancy of underground storage facilities – 85%. However, this required increasing supplies from alternative suppliers and reducing industrial consumption. According to the study, 70% of nitrogen fertilizer production capacities have now been stopped, aluminum production has been reduced by 25%, and steel production by 5%.

Factors that could worsen the situation include a cold or long winter, a recovery in Chinese LNG demand, accidents and disruptions in supply chains. In this case, the deficit may grow to 20-30 billion cubic meters. Efforts to increase LNG intake are expected to have a first effect in mid or late 2023. At the same time, the problem of supply will remain, as manufacturers do not have spare capacity.

In 2023, the rejection of Russian gas could lead to a deficit of 40-60 billion cubic meters. 60 billion cubic meters of gas is a level comparable to the annual consumption of France and Poland combined, or to the combined annual consumption of industries such as fertilizer production, petrochemicals, ferrous and non-ferrous metallurgy and all engineering. “Stopping these industries down the chain will affect other related industries, from agriculture to services. Thus, Europe does not have a comfortable way to refuse gas from Russia in the coming years – only through losses for the population and the economy, ”says Elena Kuznetsova, partner at Yakov & Partners, whose words are quoted in the study (quoted from TASS).

Nord Stream, which is the main gas pipeline for gas supplies from the Russian Federation to Europe, operated in a limited mode in the summer due to difficulties after the imposition of sanctions. By the end of August, the pumping stopped completely: first for a scheduled repair, and then – due to an oil leak.

On the impact of stopping the gas pipeline for Europe – in the material “Kommersant” “According to the gas account”.

Leonid Uvarchev