Despite Europe’s talk of weaning itself from Russian energy, many European countries probably can’t do it anytime soon. The prospects for replacing Russian energy with greener solutions is far off.

Russia likely wants to keep its gas flowing to Europe because it depends on European sales. That said, the situation in Ukraine is volatile. It’s difficult to predict what will be the next steps of the conflict, what additional sanctions or embargoes could be imposed, or what energy infrastructure could be damaged by fighting.

The uncertainty has Europe on edge, including its energy investment markets.

Russian Gas: A Worst-Case Scenario

Here’s the worst-case scenario for Europe: Russia completely shuts down its gas export network. A move like that would have severe consequences for Southern and Central Europe, which depend more on Russian exports than do Western European countries. Italy and Germany are among the largest consumers.

Under a total-shutdown scenario, even if Europe were able to increase liquid natural gas cargos in the north or south of Europe on the coast, or increase Norwegian or Algerian gas imports into Europe, it wouldn’t be enough to easily substitute the Russian gas. There is no technical ability to replace more than 100 billion cubic meters of Russian gas imports per year to Europe by any other sources anytime soon.

There are some nuances to what a shutdown means, however.

If a hypothetical Russian gas shutdown were short term, like one month, Europe may be able to manage with its stored reserves, especially during the warm spring and summer seasons. A short-term scenario like this could happen if the war led to damage along a pipeline.

But a scenario where Russian gas stopped flowing for more than one month would guarantee that parts of Europe would suffer through a difficult winter.

Even without a Russian gas shutoff of some kind, the situation in Ukraine has changed the dynamics of the European Union’s ambitious climate plans.

Long-Term Green Energy Goals in the EU

The EU is keen to achieve long-term green energy goals and may be able to offset Russian energy in the future with alternate sources like biomethanes and hydrogen gas. Those green goals are aimed at 2030, however, and still depend a lot on natural gas. Gas is included in the European Union’s 2030 Climate Target Plan as an intermediate energy source to help during a transition period toward more environmentally friendly energy production.

A lot has changed since that plan was drafted. Until recently, hardly anyone was thinking about how long a shutdown might last and what it would look like if Europe went on a strict gas diet. The EU plan was very individualistic in that it compared needs from different EU member states.

On a longer timeline, Europe will find alternatives to Russian gas and be able to either partially buy the gas from other sources or replace gas absolutely with different sources of energy.

Investors should be relieved that for the moment, Europe and Russia seem unwilling to switch off the gas flow, even though the status quo hasn’t exactly stymied volatility. There’s good reason for the ups and downs because of the potential for things to change quickly and near certainty that they’ll change long term.

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About Andrej Ambersky

Andrej Amberský is Managing Director at Solien. Before this, he held several senior roles at Eustream, including Chief Commercial Officer, Head of Commercial Dispatch Centre, and Commercial Concept Development Specialist.

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This oil and gas industry article was adapted from the GLG teleconference “EP Infrastructure — Impact of Russian Invasion of Ukraine.” If you would like access to events like this or would like to speak with oil and gas industry expert Andrej Amberský or any of our approximately 1 million industry experts, please contact us.

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Questions Addressed During the Teleconference:

• What are your broad thoughts on the industry and how we should think about EP Infrastructure?
• Can we do a business overview of EP Infrastructure and its divisions?
• How has the industry been impacted over the past two weeks?
• So, if there is a scenario of a Russian gas interruption, how much alternative capacity could realistically be taken by non-Russian gas?
• What are the significant differences between Eustream and NET4GAS?
• Could you take us through EP Infrastructure’s competitive landscape?
• What do you think the key risks we should be tracking are as part of your outlook for the next year?
• Are there any items that we haven’t gotten a chance to speak about that you think are important to note?