No Plan B as Brussels Tries to Bridge Gas Gap

European diplomats are racing to rally enough support for proposed rules that would require member states to cut their use of natural gas by 15% if supplies run short this winter because of low deliveries from Russia.

A dozen or so of the 27 EU member states have raised concerns about the proposal since it was made public last week.

But diplomats involved in the negotiations say there is no "Plan B" to fall back on if members fail to agree on a policy before a scheduled summer recess.

The European Commission had proposed a voluntary 15% reduction in consumption across EU countries compared to their five-year average, with a goal of saving 45 billion cubic meters of gas from August to March.

However, the reduction would become mandatory if an emergency were declared because of short supplies or high prices.

The EU's current Czech presidency has led the negotiations and proposed a series of amendments to build consensus among the member states.

Exemptions

Most importantly, diplomats are preparing a number of exemptions that could help blunt the impact of mandatory gas demand reductions on certain countries and industries.

Examples include carve-outs for some energy-intensive industries, countries with poor connections to the European gas grid and the Baltic countries that are connected to Russia's electricity grid, Energy Intelligence understands.

Those exemptions would reduce the total gas savings, but a senior EU diplomat disputed the idea that they would seriously undermine the proposal, saying the net impact would remain close to a 15% reduction.

Officials have also made changes to some of the technicalities of the process for triggering mandatory curbs on the use of gas.

In particular, EU member states — rather than the commission — would vote on whether or not to declare an emergency.

Negotiators also cut the duration of the pact to just one year as they debate what is at least the second revised version of the package.

Spain, Portugal Push Back

The exemptions could help gain support from those countries which have pushed back more strongly.

That group includes Spain and Portugal, which have minimal connections to the European gas grid and have therefore developed alternative supply strategies focused around LNG imports.

Energy officials from both countries have argued that blanket cuts will only hurt their gas-consuming industries without providing any additional volumes to EU members that face reduced supplies from Russia.

The proposal has also been criticized as a measure that would mainly help Germany if Russia should decide to cut off all exports of gas to the country via the Nord Stream 1 pipeline, while offering few benefits to other countries.

Nord Stream 1 has been flowing gas at just 40% of its full capacity, with Russia saying this is because Western sanctions have delayed crucial maintenance work.

The EU argues that Moscow is deliberately withholding gas to punish European countries for supporting Ukraine since it was invaded by Russian troops in February.

Meanwhile, Gazprom said on Monday that it would further reduce deliveries via Nord Stream 1 to just 33 million cubic meters per day — or 20% of its total capacity — as early as Wednesday.

For more coverage of the Ukraine crisis, visit Ukraine Crisis: Energy Impact >