Fearing Russian gas shutdown, French industry turns to oil

French tire manufacturer Michelin’s logo is seen on a Formula E racing car in Rome, Italy, May 17, 2016 REUTERS/Alessandro Bianchi//File Photo

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AIX-EN-PROVENCE, France, July 10 (Reuters) – France’s energy-intensive companies are accelerating contingency plans and converting their gas boilers to oil to avoid disruption in the event that further cuts in Russia’s gas supply lead to power failure.

Several top executives, meeting this weekend at a business and economics conference in southern France, said they were preparing for possible blackouts.

“What we’ve done is we’ve converted our boilers to run on gas or oil, and we can even switch to coal if we need to,” said Florent Menegaux, chief executive of Michelin (MICP. PA). one of the world’s leading tire manufacturers.

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“The aim is to avoid having to close a factory in case we face a shortage,” he added, saying that while a gas shortage in Europe was likely, oil would still be available as an alternative.

It takes days to start up tire production in a factory, Menegaux said, making it essential to maintain a steady supply of energy.

Russia cut flows through the Nord Stream 1 pipeline, the main route for transporting gas to Western Europe, to 40% capacity in June. Politicians and industry are concerned that there will be further supply restrictions in connection with the Russian invasion of Ukraine, which Moscow describes as a “special military operation”.

Across Europe, industry has turned to more polluting fuels than gas, as it prioritizes tackling the costs to the economy of business disruption and rising energy prices, rather than long-term goals to switch to carbon-free fuel.

French Finance Minister Bruno Le Maire told top executives attending the conference that it would be irresponsible not to prepare for deficits.

“Let’s prepare for a Russian gas shutdown,” he told them. “Today it’s the most likely scenario.”

France relies on nuclear power for about 70% of its electricity, meaning it is much less directly dependent on Russian gas than neighboring Germany.

However, state-controlled electricity producer EDF (EDF.PA) is struggling to meet France’s needs due to outages of its aging power plants, putting pressure on the rest of the energy sector.

Power production in 29 of the 56 nuclear reactors has been halted due to inspections and repairs.

The French government looks at which companies depend on an uninterrupted energy supply.

It has also sought to mitigate the impact of a rise in energy prices by limiting retail gas and electricity prices to the end of the year, contributing to French inflation being among the lowest in Europe.

A chairman of another major industrial company, who asked not to be named, told Reuters on the sidelines of the conference that he believed all major companies are considering a switch to oil.

Automaker Stellantis (STLA.MI) is considering options to produce its own energy in the event of an energy crisis, CEO Carlos Tavares said last month at a French factory.

Think of building your own power plant or investing in an existing one to secure part of the production.

Former energy minister Michal Kurtyka of Poland, whose country relies on coal for 70% of its energy, told conference executives that Europe is heading for a “perfect storm” this winter.

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Reporting by Mathieu Rosemain; edit by Barbara Lewis

Our Standards: The Thomson Reuters Trust Principles.

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