Explainer: what will happen if Russian gas flows in Germany stop?


FRANKFURT, July 11 (Reuters) – Germany, the world’s fourth largest economy, is preparing for all scenarios, including a complete shutdown of Russian gas supplies once a regular 10-day maintenance period on the massive Nord Stream 1 pipeline ends .

Maintenance on the pipeline, which will carry Russian gas directly to Germany, began on July 11, but Berlin is taking into account gas used by the Kremlin to exert political pressure on the West, something Moscow denies. read more

Here are some of the risks if the outage period is extended or the pipeline reopens with reduced flows.

Register now for FREE unlimited access to Reuters.com

WHY IS NORD STREAM 1 SO CRUCIAL?

It is the largest single route for Russian gas to Germany, generating 55 billion cubic meters (bcm) per year. Germany consumed 100 bcm last year.

Russian gas transit through Poland has been halted this year and that through Ukraine has been curtailed by the war.

Half of German households rely on gas heating, particularly from October to March, and failure to reopen Nord Stream 1 would stymie plans to fill underground gas storage for the winter.

The caverns could theoretically meet national demand for 2-1/2 months, but are only 64.6% full, compared to an October 1 target of 80%.

Meanwhile, the market for alternative gas sources worldwide is tight and prices have soared since last year as demand recovers from the pandemic.

HOW AND WHEN WOULD GERMANY RESTRICT GAS TO CONSUMERS?

If Germany pulls the trigger in the emergency phase of a three-stage escalation plan, the Bundesnetzagentur’s network regulator should ensure that the gas is distributed fairly.

The phase would be triggered by exceptionally high gas demand or significant supply disruption, for example if Nord Stream 1 were to remain closed.

Germany has been in the second phase since June 23 after Nord Stream 1 volumes fell to 40% of capacity. read more

WHICH SECTORS ARE THE MOST RISK?

Chemical, steel, glass and paper producers are the largest industrial gas consumers in Germany, but the effects are said to extend to food and porcelain production. read more

The aluminum industry, with a turnover of 22 billion euros and 60,000 employees, depends on gas for smelting and recycling.

In the paper industry, with a turnover of 15.5 billion euros and 40,000 employees, operators say that paper and cardboard are essential for food, medicine and hygiene items.

WHAT DO COMPANIES DO?

Germany’s largest gas importer, Uniper (UN01.DE) has called for a government bailout, estimated to cost up to €9 billion, according to a political source, and other utilities could face similar problems. read more

Leading steel producer Thyssenkrupp (TKAG.DE) is planning disruptions, a spokesman said, because it is not possible to use oil or coal instead of gas. If certain minimum allocations are refused, Thyssenkrupp factories may have to close and technical damage to aggregates is possible.

If the gas supply to aluminum plants is cut by as much as 30%, half of them would be at a standstill, says industry group Aluminum Deutschland. Prominent players include Hydro Aluminium, Speira and Trimet.

Chemical giant BASF (BASFn.DE) must maintain gas supplies at about 50% of its maximum demand and a shutdown of Russian flows would trigger a company-wide emergency plan.

Leading paper companies are Stora Enso (STERV.HE), UPM and Mitsubishi Hitec Paper Europe.

WHAT CAN HAPPEN TO THE ECONOMY?

In its most stark forecast yet, the Bavarian VBW industry group said the country could lose 12.7% of its economic performance in the second half of 2022 in the event of a complete halt to Russian gas supplies. read more

WHAT ARE THE SOCIO-POLITICAL RISKS?

Social struggle for gas could boost populists on the far right and far left of the political spectrum, potentially eroding rational discourse on how to move forward.

Berlin has passed a law that leaves open options to pass on sky-high prices directly, or to distribute the increases more generally among users. read more

Register now for FREE unlimited access to Reuters.com

Reporting by Vera Eckert and Tom Kaeckenhoff, additional reporting Patricia Weiss, Ludwig Burger, Christoph Steitz, Tom Sims, Hakan Ersen, editing by Kirsten Donovan

Our Standards: The Thomson Reuters Trust Principles.

Share is Love^^