Explanator: What happens if German gas flows from 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 after a 10-day regular maintenance period to the giant Nord Stream gas pipeline 1.

Maintenance of the pipeline, which carries Russian gas directly to Germany, began on July 11, but Berlin is considering the gas being used by the Kremlin to exert political pressure on the West, which Moscow denied. Read more

These are some of the risks in the event that the shutdown period lasts longer or the gas pipeline reopens with reduced flows.

WHY IS NORTH STREAM 1 SO CRUCIAL?

It is the largest Russian gas route in Germany, with 55 billion cubic meters (bcm) a year. Germany consumed 100 bcm last year.

Transports of Russian gas through Poland have stopped this year and those in Ukraine have been reduced by the war.

Half of German households depend on gas heating, especially from October to March, and the non-reopening of Nord Stream 1 would affect plans to fill underground gas storage before winter.

In theory, the caves could meet national demand for 2 and a half months, but they are only 64.6% full, compared to the October 1 target of 80%.

Meanwhile, the market for alternative gas sources is tightening around the world and prices have skyrocketed since last year as demand recovers after the pandemic.

HOW AND WHEN WOULD GERMANY LIMIT GAS TO CONSUMERS?

If Germany tightens the trigger in the emergency phase of a three-stage escalation plan, the regulator of the Bundesnetzagentur network would be responsible for ensuring that the gas is distributed fairly.

The stage would be triggered by an exceptionally high gas demand or a major supply disruption, for example, if Nord Stream 1 remained closed.

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

WHICH SECTORS ARE RISKEST?

3D printed natural gas pipelines are placed on the German and Russian flags shown in this illustration made on January 31, 2022. REUTERS / Dado Ruvic / Illustration

Producers of chemicals, steel, glass and paper are Germany’s main consumers of industrial gas, but the effects would affect food and porcelain production. Read more

The aluminum industry, with sales 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 vital for food, medicine and hygiene items.

WHAT DO COMPANIES DO?

Germany’s largest gas importer, Uniper (UN01.DE) has called for a government bailout that, according to a political source, amounts to 9 billion euros, and other utility companies could face similar problems. Read more

Leading steelmaker Thyssenkrupp (TKAG.DE) is drawing up plans for the outages, according to a spokesman, as it is not possible to use oil or coal instead of gas. If certain minimum allocations are denied, Thyssenkrupp plants should be shut down and technical damage to the aggregates may occur.

Cutting the gas supply to aluminum plants by as much as 30% would mean that half of them would remain inactive, according to the Aluminum Deutschland industrial group. Featured players are Hydro Aluminum, Speira and Trimet.

The chemical giant BASF (BASFn.DE) needs to keep its gas supply at around 50% of its maximum demand and stopping Russian flows would trigger an emergency plan for the entire company.

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

WHAT COULD HAPPEN TO THE ECONOMY?

In the saddest forecast so far, the Bavarian vbw industry group said the country could lose 12.7% of its economic performance during the second half of 2022 if Russian gas supply is completely stopped. Read more

WHAT ARE THE SOCIO-POLITICAL RISKS?

The social struggle for gas could give a boost to populists on the far right and far left of the political spectrum, potentially eroding rational discourse on how to proceed.

Berlin has passed a law that keeps open the options to directly pass on very high prices or, alternatively, try to distribute the increases more generally among users. Read more

Report by Vera Eckert and Tom Kaeckenhoff, additional report by Patricia Weiss, Ludwig Burger, Christoph Steitz, Tom Sims, Hakan Ersen, edited by Kirsten Donovan

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