Germany faces a risk of €40 billion if the winter turns cold

Uniper Gas in Germany has warned of economic losses of about 40 billion euros if the winter becomes colder than average. a report He said that such a development could plunge Germany into recession.

Every year, with the start of October and often the heating season, Europe begins a race to fill its gas storage facilities in time to secure a comfortable level of stock before peak electricity and heating demand. Norway is ready to increase gas exports to the European Union, US liquefied natural gas producers are ready to increase shipments to Europe, and according to Germany’s energy market regulator, there is an abundance of gas. There is one problem with that. The situation can change very quickly.

Gas storage capacity in Germany currently Just over 76% full. It must be 90% full to prevent the economic devastation that Uniper warns of. There will still be losses, even with 90% full storage, but they will be much less than €40 billion, equivalent to about $46.6 billion. If storage is 90% full, an extremely cold winter would cost the German economy “only” 14 billion euros, or $16.3 billion, according to the study by Uniper, which was conducted by a consulting outlet called Frontier Economics.

The second amount may not look like peanuts, but according to Uniper, the difference between the two is “a difference of about 25 billion euros, which could be the difference between stability and recession.” This is how vulnerable the German economy is to any unfavorable fluctuations in gas supplies.

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From the Uniper report, some financial damage – which can be measured in amounts exceeding billions of dollars – appears to be guaranteed. It is also unlikely that this damage will remain as low as €14 billion because maintaining storage levels at 90% during the peak demand season is impossible precisely because it is the peak demand season.

But not everyone is so pessimistic. In another recent report, the Independent Commodity Intelligence Services said that even extremely low temperatures during December and January would not threaten the security of Germany’s natural gas supply, so there is no reason to worry about it.

“Even in the event of a very cold winter, additional gas and LNG storage can together ensure adequate supplies as Europe builds sufficient regasification capacity,” ICIS said in its report. The outlet admitted that in a severe winter scenario, Europe could see its gas reserves fall to 20%, low in the red, but this would not be a problem because there will be more liquefaction capacity coming next summer. However, ICIS also admitted that price could become an issue as demand for LNG rises during the winter.

Meanwhile, earlier this month, Juniper He asked To obtain permission to close one of the largest natural gas storage facilities in Germany because it was unable to fill it in time. Bloomberg said in a report on the news that the reason is related to the geology of the storage site, which is porous rather than cavernous, which means it must be filled and emptied slowly. It is also a matter, according to Uniper, of regulations, which made it uneconomical to make the effort to fill the Breitbrunn facility.

Meanwhile, Ukraine said it will need to increase its gas imports this winter, by a large margin. “We plan to boost import capacity by about 30%,” Energy Minister Svetlana Grynchuk said this month. “All of this will depend on how quickly we can restore things. The faster we can restart facilities, the less need to import gas.” The gas will come from members of the Group of Seven, including Germany.

Written by Irina Slav for Oilprice.com

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