EU member states agree emergency gas curbs

The gas storage plant Reckrod is pictured near Eiterfeld, central Germany, July 14, 2022, after the Nord Stream 1 pipeline was shut down due to maintenance. European Union governments agreed on July 26, 2022 to ration natural gas this winter to protect themselves against possible supply cuts by Russia. (MICHAEL PROBST / AP, FILE)

BRUSSELS – European Union member states have reached a political agreement on a 15 percent voluntary reduction of natural gas demand from the average of 2017-2021, officials announced on Tuesday.

Jozef Sikela, Czech Minister of Industry and Trade, presided over an exceptional EU Council meeting on energy on Tuesday, with the EU preparing for possible gas supply disruptions over the winter.

"Member states agreed to reduce their gas demand by 15 percent compared to their average consumption in the past five years, between 1 August 2022 and 31 March 2023, with measures of their own choice," the European Council said in a statement.

Europe faces a tighter gas squeeze from Wednesday, when Russia's Gazprom has said it would cut flows through the Nord Stream 1 pipeline to Germany to a fifth of capacity.

READ MORE: EU asks members to cut gas usage amid new Russian warning

With a dozen EU countries already facing lower Russian supplies, Brussels is urging member states to save gas and store it for winter, fearing Russia will completely cut off flows in retaliation for sanctions over Russian special military operation in Ukraine.

The cuts could be made binding in a supply emergency.But members agreed to exempt numerous industries from the binding 15 percent cut

"Possible measures include reducing gas consumed in the electricity sector, measures to encourage fuel switch in industry, national awareness raising campaigns, targeted obligations to reduce heating and cooling and market-based measures such as auctioning between companies," reads the European Council statement.

The cuts could be made binding in a supply emergency, provided a majority of EU countries agree. But members agreed to exempt numerous industries from the binding 15 percent cut. 

Hungary was the only country that opposed the deal, two EU officials said.

The EU deal would exempt from the binding gas cut Ireland, Malta and Cyprus. These countries are not connected to other member states' gas networks and therefore could not share spare gas if needed.

Countries with a limited ability to export gas to other EU countries can request a lower target, provided they export what they can. That could include Spain, which does not rely on Russian gas and had initially opposed the plan.

"Everyone understands that when someone asks for help, you have to help," Spanish Energy Minister Teresa Ribera said.

Countries that overachieve an EU target for filling gas storage by August could also face weaker targets, potentially softening cuts for roughly a dozen states with relatively full storage, including Germany and Italy.

States can exempt gas used in critical industries, such as energy-intensive steelmaking.

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A "Union Alert" could be activated, either by the European Commission if it perceives a "substantial risk of a severe gas shortage or an exceptionally high gas demand", or "if five or more member states that have declared an alert at national level request the Commission to do so."  

The logo of 'Gazprom Germania' is pictured at the company's headquarters in Berlin, Germany, April 6, 2022. (MICHAEL SOHN / AP, FILE)

Italian Ecological Transition Minister Roberto Cingolani said the country's binding target would be nearer 7 percent than 15 percent, once gas reductions it has made compared with previous years were taken into account.

News of the latest supply drop has driven gas prices higher, adding to the cost of filling storage, while creating incentives to use less.

On Tuesday, the benchmark front-month Dutch contract rose more than 10 percent and is around 430 percent higher than a year ago.

The plan has tested countries' solidarity. Poland approved the deal, but Climate Minister Anna Moskwa said one country's industry should not be forced to use less gas to help other states.

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Others were more positive, including Malta and Portugal, which won softer targets. Maltese energy minister Miriam Dalli said the deal reflected countries' varying energy situations.

"We managed to pass on a strong message of solidarity," she said.

Some raised concern the savings would still not be enough to avert a winter shortage. Levels vary between countries, but the EU has reduced its combined gas use by only 5 percent, despite months of soaring prices and Russian supplies.

"Fifteen percent will probably not be enough, given what the Russians have just announced," Irish Environment Minister Eamon Ryan said.