EU must extend gas demand curbs to prepare for next winter -think tank

OSLO (Reuters) - The European Union should extend a target to cut gas demand in response to lost supply from Russia by at least six months to October this year to ensure there is enough for next winter, think tank Bruegel said on Thursday.

EU countries agreed last year to reduce natural gas demand by 15% between Aug. 1, 2022 and March 31, 2023, compared with the average of the same period in the previous five years.

This demand-reduction target should be extended, Bruegel, which provides analysis to policymakers in the EU, said.

"Assuming limited Russian exports continue, and weather conditions are typical, demand up to Oct. 1, 2023 must remain 13% lower than the previous five-year average," Bruegel said.

Bruegel's analysis showed that if Russian gas transit through Ukraine was to halt, demand savings would need to rise to 17% and extend to 20% in the event of all Russian pipeline gas exports ceasing, including via Turkey.

These cuts would contribute to achieving an EU gas storage target requiring tanks to be 90% full by Oct. 1 this year, the Bruegel analysts said.

EU gas storage is currently at an unusually high level of 71% full and is unlikely to be fully depleted by the end of this winter (2022/23), they added.

In 2022, the EU reduced gas demand by approximately 500 terawatt hours (TWh), or 12% of the 2019-21 average, the analysts said.

Gas savings in the power sector were only 2% last year due to weak nuclear and hydro output, but should improve this year as French nuclear output returns, the analysts said.

Meanwhile, the start-up of new infrastructure to import liquefied natural gas (LNG) in Germany and the Netherlands has improved the EU's ability to diversify supply, they added.

The 27-nation bloc imports the bulk of its gas.

Policymakers should underpin future demand reduction targets by encouraging a structural shift away from gas, they suggested.

This should include support for rapid deployment of renewable energy and grid infrastructure, energy-efficiency measures and decarbonisation of home heating and industry processes.

(Reporting by Nora Buli in Oslo; editing by Nina Chestney and Jane Merriman)