IEA warns Europe must cut gas consumption immediately

The International Energy Agency has warned Europe must take immediate steps to reduce gas consumption ahead of the winter, urging governments to cap air conditioning use and start auctioning gas to industry or risk rationing during the coldest months.

Fatih Birol, the IEA head, said on Monday that cuts to Russian supplies meant European efforts so far were falling short and urged governments to “make every remaining day count” with efforts to fill gas storage facilities over the next three months.

“Russia’s latest moves to squeeze natural gas flows to Europe even further, combined with other recent supply disruptions, are a red alert for the European Union,” Birol wrote in a report.

He said that while high prices had already curbed some consumption “significant additional reductions are needed to prepare Europe for a tough winter ahead”.

The IEA chief said that the latest analysis from the agency, which acts as an energy watchdog for OECD countries, suggested that Europe needed to curb consumption by 12bn cubic metres (bcm) between now and the start of the heating season, or the equivalent of 130 tanker loads of seaborne liquefied natural gas.

The call from the IEA, which acts as a watchdog for OECD members, comes as Brussels is this week due to announce a gas reduction plan for winter, which will recommend measures for EU countries to cut gas use.

Negotiations on the plan continued over the weekend, focusing on whether the European Commission could implement mandatory gas reduction targets for member states, according to two EU officials.

Commission president Ursula von der Leyen travelled to Azerbaijan to announce a gas deal on Monday that aimed to increase deliveries of natural gas from the central Asian country to the EU to 12 bcm this year, up from 8.1 bcm in 2021.

The plan is for supplies to ultimately reach “at least” 20 bcm by 2027, according to a draft memorandum seen by the Financial Times, arriving in the EU through the Southern Gas Corridor pipeline, a joint project between Brussels and Baku that opened in 2018 and is mainly supplied from gasfields in the Caspian Sea.

But the IEA said plans to diversify supplies from Russia would not be enough on their own this winter and said the biggest single step the EU could take to meet its gas storage target of 90 per cent, the level the IEA says the EU would need to reach by the start of the heating season if Russian gas flows are severed entirely later this year, is to bring down consumption.

“It is categorically not enough to just rely on gas from non-Russian sources — these supplies are simply not available in the volumes required to substitute for missing deliveries from Russia,” Birol said.

“This will be the case even if gas supplies from Norway and Azerbaijan flow at maximum capacity, if deliveries from north Africa stay close to last year’s levels, if domestic gas production in Europe continues to follow recent trends, and if inflows of LNG increase at a similar record rate as they did in the first half of this year.”

Birol laid out five steps he said would help the EU meet its targets, including “setting cooling standards and controls” for household and public building air conditioner use, burning coal and oil instead of gas for electricity generation and finding ways to “harmonise” emergency gas policy between members.

He said the EU should also introduce “auction platforms to incentivise EU industrial gas users to reduce demand” through a competitive bidding process.

According to a draft commission proposal seen by the Financial Times, Brussels will set out guidelines on which industries should be prioritised in the event of a complete shut-off of Russian gas supplies.