The EU appears headed towards adopting a strategy for joint supply of natural gas, LNG and hydrogen, along the lines of a policy implemented for joint Covid-19 vaccination orders at the height of the pandemic, to combat skyrocketing energy prices, a draft prepared ahead of tomorrow’s summit, bringing together the EU’s 27 leaders, has indicated.
Governments of Europe’s south, hit harder by the energy crisis, and European consumers across the continent are anticipating measures that can help contain sharply increased gas, electricity and oil prices.
The joint supply plan’s implementation would come as a bold initiative by the EU, taking steps to greatly reduce its reliance on Russian gas, but various obstacles will need to be overcome.
Joint energy orders will be far trickier for the EU to execute than the mass orders it had placed with pharmaceutical companies for Covid-19 vaccinations back in June, 2020, as the former are commodities traded in fluctuating markets.
LNG suppliers such as the USA, Qatar and Algeria would have to redirect to Europe quantities usually shipped to Asian markets at highly profitable prices. Also, the reaction of China, America’s number one buyer of LNG, remains unknown.
The joint-supply strategy would be combined with the establishment of an energy safety reserve, as the European Commission has ordered EU member states to fill underground gas storage (UGS) facilities to 90 percent of their capacities by November 1, in preparation for next winter.
This would resolve energy sufficiency concerns but currently elevated prices are an issue. Also, many European UGS facilities have, until now, been managed by Russia’s Gazprom. It remains unclear if the Russian gas giant would be legally obliged to abandon these facilities.
The joint-supply strategy has been on the negotiating table since last year but held back by disagreements.