‘Europe may need to cut gas demand by 55bcm to mitigate supply risks’

Europe has utilised almost all of its short-term energy efficiency possibilities, leaving it susceptible to a “considerable” risk of further reduction in Russian piped gas, according to a report

Europe could be at considerable risk if it fails to immediately cut gas demand by 55 billion cubic metres (bcm) of natural gas.

That’s according to new analysis from McKinsey, which suggests there could be a rebound in Asian demand or a further reduction in Russian imports, which could potentially exacerbate the situation.

The authors of the report estimate that in the wake of the Ukraine war, a total cease of Russian imports could lead to a 25 bcm reduction in Europe’s supply.

Additionally, an increase in Asian LNG demand could lead to a 35bcm reduction while a colder winter could boost European gas demand by 15 bcm.

The research also shows that nearly 57% of EU manufacturers would not be able to reduce gas consumption further while maintaining output over the next two years.

This could indicate that further gas rationing measures could have a substantial impact on the EU economy.

According to the McKinsey report “A balancing act: Securing European gas and power markets,” even if Europe meets its RePowerEU targets to reduce gas consumption and improves energy efficiency across buildings and industry, volatile gas prices and potential supply disruptions still pose a risk to many economic sectors.

Namit Sharma, Senior Partner at McKinsey suggests that businesses may need to consider diversifying their energy sourcing and managing demand, investing in natural gas substitutes or storage, and closely monitoring movements in the energy market to mitigate risks.

Thomas Vahlenkamp, Senior Partner at McKinsey, added that “If Europe can sustain and accelerate several gas-demand reduction measures, the market is likely to remain balanced without significant price spikes in the coming years.”

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