Natural Gas Shortage: What are the impacts for your business?

In response to Western sanctions following invasion of Ukraine, Russia cut supplies of natural gas to several countries in Europe. The continent was already facing questions on energy security before the war began. Now a potential natural gas shortage might cause supply chain disruptions. Reasons include: 

• Reduced flow of natural gas in Russian gas pipelines to Europe. Russia has stopped natural gas delivery to Bulgaria, Denmark, Finland, Latvia, Netherlands, and Poland. It claims that it could only deliver 20% of capacity to Germany’s Nord Stream 1 pipeline because of turbine repair.
• Alternatives such as liquified natural gas (LNG) are insufficient. Imports of LNG via floating storage and regasification units currently provide only small volumes. Europe is racing to develop liquefied natural gas (LNG) import terminals and new pipelines.
• Transition to renewable energy takes time. Governments aim to speed transition to renewables such as biogas or fuels based on clean hydrogen. However, standard sources such as nuclear power and fossil fuels, most notably coal, are seeing a revival.

Disruption of gas supplies from Russia and Ukraine, along with soaring prices, have jolted global supply chain and manufacturing industries. In advanced economies such as the US and Germany, industry consumes about 33% - 37% of natural gas supply. Energy-intensive industries could suffer from a shortage of natural gas needed for production processes or to generate energy. 

According to a July 2022 report by the International Monetary Fund, alternative sources could replace up to 70 percent of Russian gas. This means Europe could avoid extreme shortages during a temporary disruption of around six months.

Nonetheless, a potential natural gas shortage deeply worries most European governments and key industries. Energy security is central to keeping advanced economies running. Households and businesses are being called on to conserve gas and energy to reduce the worst impacts. Even without a natural gas shortage, skyrocketing prices threaten to cripple industry.  

In most industrial processes, energy supplies cannot be replaced quickly or easily. Technical difficulties are joined by often unwieldy approvals processes. As the EU proposes that member states cut natural gas use by 15% in the coming months, rationing may be needed.  

Inflated costs are already forcing strategy shifts. Businesses may have to maintain operations at a reduced load, distribute production capacity among global locations, or stock up on fuel. The search is also on for alternatives. 

Mercedes-Benz, for example, is confident that the company can replace potential gas supply shortfalls with power from renewable energy sources. Yet businesses also need to understand whether their suppliers are at risk of potential drop in natural gas supply. Here is where The riskmethods Solution^TM can help. 

In the initial weeks and months of the Russia-Ukraine war, alerts provided by The riskmethods Solution enabled customers to react faster to the changing situation.

On the country level, customers received early warnings regarding gas supplies and the Russia situation. They also received immediate notification if their suppliers were impacted. Such information gives companies a head-start over the competition in the search for alternatives. 

Here are five tips on how The riskmethods Solution can help you assess your risk of a natural gas shortage in your supply chain: 

 

Soaring prices continue to impact entire economies, industries, and companies. riskmethods data shows that power/energy outage alerts have more than doubled in the past two years. Our “energy outage” risk indicator warns of significant power shortages, blackouts, and natural gas shortages.  

The energy outage indicator is among approximately 180 risk indicators available in The riskmethods Solution. Use the power of artificial intelligence and real-time monitoring to receive alerts on all kinds of threats to your supply chain.