Europe’s largest Russian gas purchasers were scrambling to find other fuel sources and even considering burning additional coal to compensate for lower gas flows from Russia on Monday, which threatened an energy catastrophe in winter if reserves were not replenished.

Eni (ENI.MI) of Italy said it had been warned by Russia’s Gazprom (GAZP.MM) that it would only get a portion of its request for gas supplies on Monday, bringing the nation closer to declaring a state of alert and initiating gas-saving measures.

Germany, which has also experienced weaker Russian gas supplies, revealed its latest proposal to expand gas storage levels on Sunday, as well as the possibility of restarting coal-fired power facilities that it had planned to phase down.

“That is painful, but it is a sheer necessity in this situation to reduce gas consumption,” said Economy Minister Robert Habeck, a Green Party member who has advocated for a speedier transition away from coal, which emits more greenhouse gases.

“But if we don’t do it, then we run the risk that the storage facilities will not be full enough at the end of the year towards the winter season. And then we are blackmailable on a political level,” he said.

After the West implemented sanctions in reaction to Moscow’s invasion of Ukraine, a gas transit route to Europe as well as a key wheat producer, Russia reiterated on Monday that Europe was solely to blame for the gas issue. more info

The energy issue adds to the woes of European policymakers, who are already concerned about rising inflation in home electricity bills and food costs.

On Monday, the benchmark Dutch front-month gas contract was trading at over 127 euros per megawatt hour, up more than 50 percent since the beginning of 2022.

Markus Krebber, CEO of Germany’s biggest power producer RWE (RWEG.DE), said electricity costs might take three to five years to fall back to pre-crisis levels, restricting household spending and dragging on the economy.

Russian gas shipments to Germany through the Nord Stream 1 pipeline, the major route feeding Europe’s largest economy, were still operating at approximately 40% capacity on Monday, despite having increased since the beginning of last week.

Both Eni and the German utility Uniper (UN01.DE) reported getting less than their contractual Russian gas amounts.

CHANGE BACK TO COAL

According to Germany’s economics ministry, bringing back coal-fired power plants may add up to 10 gigatonnes of capacity if gas supply becomes crucial. On July 8, the upper chamber of parliament will hear a bill connected to the relocation.

Along with a return to coal, Germany will implement an auction system in the next weeks to incentivize industry to use less gas, as well as financial assistance for Germany’s gas market operator, through state lender KfW [RIC:RIC:KFW.UL], to fill gas storage facilities quicker.

Austria’s government agreed on Sunday with utility Verbund (VERB.VI) to convert a backup gas-fired power plant to generate electricity using coal in the event of a gas supply crisis from Russia. more info

Germany and Italy are among the most dependent on Russian gas, but other European nations have also experienced gas supply difficulties, and demand has grown abnormally high for the time of year after a heatwave that increased usage of air conditioning.

An emailed request for comment on Gazprom’s shipments to Italy was not immediately returned.

Dmitry Peskov, a Kremlin spokesman, claimed on Thursday that the supply cuts were not planned and were due to maintenance concerns. This answer, according to Italian Prime Minister Mario Draghi, is a falsehood.

Italy, whose gas technical committee meets on Tuesday, has suggested it may declare a state of emergency this week if Russia continues to restrict deliveries.

The action would result in efforts to cut usage, such as limiting gas for certain industrial customers, increasing output at coal power plants, and requesting additional gas imports from other providers under existing contracts.

Source: Reuters

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