Vladimir Putin’s war on Ukraine has already led to surging prices for gas, oil, motor fuel and power since the invasion began in February. Now questions are being raised about the security of supplies as the threat of more western sanctions against the Kremlin and a row over payments cast uncertainty over imports of Russian energy.
As if there was any doubt about the intensity of the energy market shock set off by the military campaign, German moves to activate the first phase of an emergency plan that could lead to gas rationing are salutary. The development comes in spite of chancellor Olaf Scholz’s opposition to an EU ban on oil and gas from Russia. That stance will be tested again and again in coming weeks if the Russians dig in for the long haul in Ukraine and there is no deal to end the conflict. Putin is using energy as a lever by insisting on payments for energy in roubles, something western buyers won’t accept because it would dim the impact of financial sanctions and boost the Russian currency.
Taoiseach Micheál Martin was at pains to stress in an RTÉ interview on Thursday that he did not speak of winter fuel shortages when he addressed the Fianna Fáil parliamentary party on Wednesday evening. “I simply said that energy security is something we have to focus on and prepare for over the next winter period,” Mr Martin said.
This question ranks high on the agenda in talks between officials and industry on the fallout from war. Concern has been raised in such engagements, constant since the invasion began, about the stability of supplies next winter when domestic demand for gas and electricity is at its highest and the full brunt of any interruption to Russian supplies would hit markets. That in turn has led people to dust down contingency plans that deal with supply priorities if energy has to be rationed in Ireland.
“It’s happening in real time,” said one energy industry figure with knowledge of the talks. “It’s a normal part of looking ahead, looking around the corner at what would need to be done.”
Measures discussed to mitigate any supply crunch include the prospect of delaying the 2025 scheduled closure of the giant coal-fired power station at Moneypoint, where the ESB has already resolved to stop using Russian coal in favour of Colombian supplies. People familiar with the discussions are quick to acknowledge that such a move would blunt efforts to reach climate targets, yet the war has changed the debate. “Climate is rather important but the security of supply trumps it,” the energy figure said. Another person, familiar with the thinking in the Coalition, said: “Nobody wants to be in this space.”
Liquefied natural gas
Another option under examination is the development of some State-owned liquefied natural gas (LNG) storage capacity. Such an initiative would be separate to plans by the privately-owned US group New Fortress Energy to build a €650 million LNG plant in Co Kerry, which have raised the hackles of the Greens and environmentalists. That plan is before An Bord Pleanála with a decision due in September, but Government policy is opposed to imports of fracked gas.
For all that, there is some confidence in industry and official circles that a short-term gas supply crunch can be avoided. The reason for that is the source of Irish supplies, a quarter of which come from the domestic Corrib field on the western coast while the remainder is imported on pipelines into Northern Ireland from Britain, which takes much of its supply from Norway. Although the current proportion of Russian gas supplies into Britain is said to be about 6per cent, a senior business person said it would not take much of an interruption to Russian supplies to distort the UK market at a time of higher seasonal demand for gas.
Still, the lesson learned in the weeks since Russian tanks stormed Ukraine is prices can rise rapidly even when gas and oil continue to flow through pipelines. If rocketing prices have created a political difficulty for the Government, any energy rationing would lead to problems of a different order.