Tag Archives: Natural Gas Extraction

Business

Natural-Gas Prices Plunge as Unseasonably Warm Weather Is Forecast

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A sudden thaw across the Northern Hemisphere has melted down natural-gas prices, upending dire forecasts of energy shortages and sinking Vladimir Putin’s plan to squeeze Europe this winter.

It isn’t expected to remain as balmy as it was on Wednesday, when temperatures hit 66-degrees Fahrenheit in New York, but the forecasts that energy traders monitor call for abnormally warm weather extending into February, sapping demand for the heating fuel.

U.S. natural-gas futures for February delivery ended Wednesday at $4.172 per million British thermal units. That is down 57% from the summer highs notwithstanding a 4.6% gain on Wednesday that snapped a four-session losing streak, including an 11% drop on Tuesday. 

The price is now about the same as it was a year ago, when temperatures were also warmer than normal and before Russia’s invasion of Ukraine jolted energy markets.

The plunge is a bad omen for drillers, whose shares were among the stock market’s few winners last year. Cheaper gas is good news for households and manufacturers whose budgets have been busted and profit margins pinched by high fuel prices. Though shocks of cold and problems with pipelines could still push up regional prices, less expensive natural gas should help to cool inflation in the months ahead. 

There are also major geopolitical implications. Mild weather is driving gas prices lower in Europe, too, spelling relief for the region that coming into the winter faced the possibility of rolling blackouts and factory shutdowns. The war threw energy markets into chaos, but benchmark European natural-gas prices are now less than half of what they were a month ago and lower than any point since the February invasion. 

The drop is a welcome surprise for European governments that committed hundreds of billions of dollars to shield consumers and companies from high energy prices. Moscow cut supplies of gas to Europe last year in what European officials described as an attempt to undermine military and financial support for Kyiv.

So far, Russia’s strategy isn’t working. Warm weather is limiting demand, as is a European Union-led effort to curb consumption. But analysts say prices in Europe could shoot up again when the continent tries to refill stores for the 2023-24 winter without much Russian gas.

PHOTOS: How a 102-Year-Old Maritime Law Affects Today’s Home-Heating Prices

Besides being burned to heat roughly half of American homes, natural gas is used for cooking, along with making electricity, plastic, fertilizer, steel and glass. Last year’s high prices were a big driver of the steepest inflation in four decades.

When prices peaked in August, the question was whether there would be enough gas to get through the winter, given record consumption by domestic power producers with few alternatives, as well as demand in Europe, where the race is on to replace Russian gas.

Now the question in the market is how low prices will go.  

They were already falling when the late-December storm brought snow to northern cities and stranded travelers. Frigid temperatures prompted a big draw from U.S. natural-gas stockpiles and froze wells in North Dakota and Oklahoma. At its peak, the storm took nearly 21% of U.S. gas supply offline, according to East Daley Analytics, a gas consulting firm.  

The demand surge and the supply disruptions were fleeting and failed to counteract forecasts for balmy January weather. Prices were also pushed lower by another delay in the restart of a Texas export facility. It has been offline since a June fire left a lot of gas in the domestic market that would have otherwise been shipped overseas. 

Temperatures above 60 degrees Fahrenheit are forecast this week around the Great Lakes and along the Ohio Valley, while highs in the Southeast might reach into the 80s.

As measured in heating-degree days, a population-weighted measure of temperatures below 65 degrees Fahrenheit, this week will be twice as warm relative to normal as the last week of December was cold, said Eli Rubin, senior energy analyst at the gas-trading firm EBW AnalyticsGroup.

The firm estimates that warmer weather over the first half of January will reduce gas demand by about 100 billion cubic feet over that stretch. That is about the volume of gas that the U.S. produces each day. The Energy Information Administration estimates that daily American output hit a record in 2022.

Analysts anticipate similarly strong production in 2023. They expect the year to pass without new LNG export capacity coming online for the first time since 2016, when the U.S. began to ship liquefied natural gas abroad from the Lower 48 States. 

“The market is moving from a mind-set of winter scarcity to looking ahead to exiting winter with more in storage, adding production and not adding any new LNG exports,” Mr. Rubin said. “If anything, the market looks oversupplied.” 

Analysts have been reducing their gas-price assumptions as well as their outlooks for producers as the first weeks of winter pass without sustained periods of cold weather. 

Gabriele Sorbara, an analyst at Siebert Williams Shank, told clients this week that he expected natural gas to average $4.25 in 2023, down from a forecast of $5.50 before the warm spell. As a result, he downgraded shares of

EQT Corp.

, the biggest U.S. producer and one of the top-performing stocks in the S&P 500 last year, from buy to hold. 

“EQT will be dead money until estimates recalibrate and there is visibility of a rebound in natural-gas prices,” he wrote in a note to clients.  

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Hedge funds and other speculators have, on balance, been bearish on natural-gas prices since the summer, maintaining more wagers on falling prices than on gains, according to Commodity Futures Trading Commission data. Analysts said that is probably the safe bet. 

“We continue to caution against any attempts to time a price bottom,” the trading firm Ritterbusch & Associates told clients this week. 

—Joe Wallace contributed to this article.

Write to Ryan Dezember at ryan.dezember@wsj.com

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US

Biden to Announce Restrictions on Methane Emissions at COP27

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SHARM EL SHEIKH, Egypt—President Biden is moving to tighten restrictions on emissions of methane, a potent greenhouse gas, and boost funding for developing countries to adapt to the effects of climate change and transition to cleaner technologies, according to the White House. 

Mr. Biden is expected to announce the measures in a speech before a United Nations climate conference, known as COP27, according to a fact sheet released by the White House ahead of the address. The measures include plans for the Environmental Protection Agency to require oil-and-gas companies to monitor existing production facilities for methane leaks and repair them, according to administration officials.

Methane is 80 times as potent at trapping heat from solar radiation as carbon dioxide over its first 20 years in the atmosphere. It is responsible for about half a degree Celsius of global warming since the preindustrial era, and its levels are rising fast, according to measurements made by the National Oceanic and Atmospheric Administration. 

The planned rules affect hundreds of thousands of U.S. wells, storage tanks and natural-gas processing plants, and require companies to replace leaky, older equipment and buy new monitoring tools.

EPA Administrator

Michael Regan

said flaring—a technique used by gas producers to burn off excess methane from oil and natural-gas wells—would be reduced at all well sites under the planned rules. Owners would be required to monitor abandoned wells for methane emissions and plug any leaks, he said.

“We’ve tightened down to limit flaring as much as possible without banning it,” Mr. Regan said.

President Biden met on Friday with Egyptian President Abdel Fattah Al Sisi in Sharm El Sheikh.



Photo:

KEVIN LAMARQUE/REUTERS

The American Petroleum Institute, which represents U.S. oil and gas producers, said it was reviewing the proposed rule. 

“Federal regulation of methane crafted to build on industry’s progress can help accelerate emissions reductions while developing reliable American energy,”

Frank Macchiarola,

API’s senior vice president of policy, economics and regulatory affairs, said in a statement.

Lee Fuller of the Independent Petroleum Association of America, a Washington, D.C., trade group that represents many smaller producers, said his group would be reviewing the regulations closely. 

“While everyone wants to produce oil and natural gas using sound environmental procedures, there will always be a need to assure that the regulatory structure is cost effective and technologically feasible,” he said in a statement. 

Rachel Cleetus, lead economist for the Union of Concerned Scientists, a nonprofit advocacy group, said in a statement that the EPA had “taken an important step forward by issuing a robust standard for methane emissions from oil-and-gas operations.”

Mr. Biden is walking a political tightrope during his brief stopover in Egypt on his way to summits in Cambodia and Indonesia. The war in Ukraine has unleashed turmoil in energy markets, underscoring the world’s continued reliance on fossil fuels.

Control of the U.S. Senate and House of Representatives still hinged on races that were too close to call as of early Friday morning, with both parties girding for a final outcome that might not be known for days. If Republicans win control of either chamber it would mean more power to a party that is deeply skeptical of Mr. Biden’s climate agenda and reluctant to spend billions of dollars to help other countries transition to cleaner sources of energy.

The White House said Mr. Biden is expected to announce an additional $100 million for the United Nations Adaptation Fund, which helps countries adapt to floods, droughts and storms that climate scientists say are increasing in frequency and severity as the earth’s atmosphere and oceans warm. The U.S. has yet to pay the $50 million it pledged to the fund at last year’s climate talks in Glasgow.

As world leaders gather for the COP27 climate conference in Egypt, WSJ looks at how the war in Ukraine and turmoil in energy markets are complicating efforts to reduce carbon emissions. Photo: Mohammed Salem/Reuters

The U.S. also owes $2 billion to the U.N. Green Climate Fund, which finances renewable energy and climate adaptation projects in the developing world. The administration has asked for $1.6 billion for the fund in the fiscal 2023 budget.

The White House said Mr. Biden would also pledge $150 million to a U.S. fund for climate adaptation and resilience across Africa; $13.6 million to the World Meteorological Organization to collect additional weather, water and climate observation across Africa; and $15 million to support the deployment of early-warning systems in Africa by NOAA in conjunction with local weather-forecasting agencies.

The U.S. pledges don’t address demands from poorer nations to provide money for damage they say is the result of climate-related weather events—a new category of funding known as “loss and damage.” This week at the summit, Belgium and Germany pledged a combined 172 million euros, equivalent to $176 million, to support loss-and-damage payments to developing countries. Scotland pledged $5.8 million and Ireland pledged $10 million.

Developing countries have made a renewed push to set up a mechanism for loss-and-damage payments after severe floods in Pakistan this summer that caused $30 billion in losses, according to World Bank estimates, killed more than 1,700 people and displaced 33 million residents. Sen.

Sherry Rehman,

Pakistan’s federal minister for climate change, said she is hoping for more resources from the U.S. and other nations to help her country.

U.S. negotiators are concerned the concept of loss and damage exposes wealthier nations to spiraling liability. There is also the scientific uncertainty of determining which effects can be tied to human-induced climate change and which are part of normal seasonal variation. However, U.S. climate envoy

John Kerry

said this week at the conference that he is open to discussing loss and damage.

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“We need more,” Ms. Rehman said in an interview. “What you hear everywhere at COP is ‘action now.’ Everything else is fluff.”

Mr. Biden arrived at the climate summit Friday after most world leaders have departed. He met privately with Egyptian President

Abdel Fattah Al Sisi

at the conference, located at a resort town along the Red Sea. The U.S. and Germany were expected to announce Friday a $250 million financing program to build 10 gigawatts of new wind-and-solar energy facilities in Egypt while decommissioning 5 gigawatts of inefficient natural-gas power plants.

The Biden administration’s efforts to curb methane emissions follow an agreement reached on the sidelines of the Glasgow summit a year ago, in which China and the U.S. pledged to work on reducing emissions of the gas. Beijing this week announced a plan to cut methane emissions but hasn’t yet included the new measures in its climate plans submitted to the U.N. 

Nigeria announced its first-ever regulations, including limits on flaring, to cut overall methane emissions by more than 60% over 2020 levels. Canada said Thursday it plans to cut emissions of methane from its oil-and-gas industry by more than 75% over 2012 levels by 2030. 

Emissions from flaring are far higher than previous government and industry estimates, according to an analysis of 300 wells in four states published in September in the journal Science.

The White House says 260 billion cubic meters of gas are wasted every year from flaring and methane emissions within the oil-and-gas sector. 

Under the 2015 Paris climate agreement, countries aim to limit global warming to well under 2 degrees Celsius above preindustrial levels and preferably to 1.5 degrees. The gap between the emissions cuts pledged by 166 nations, including the U.S., and their current emissions puts the world on track to warm 2.5 degrees Celsius, or 4.5 degrees Fahrenheit, by the end of the century, according to a recent U.N. report.

White House officials point to Mr. Biden’s support of the Democrats’ climate, health and tax legislation that allocates hundreds of billions of dollars to climate and energy programs, including tax credits for buying electric vehicles and investments in clean technologies.

Administration officials said the legislation has helped put the U.S. on track to meeting Mr. Biden’s goal of cutting domestic emissions 50% below 2005 levels by 2030.

—Matthew Dalton and Scott Patterson contributed to this article.

Write to Eric Niiler at eric.niiler@wsj.com

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World

Russia to Keep Nord Stream Pipeline Shut, Citing Mechanical Problems

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Russia indefinitely suspended natural gas flows to Europe via a key pipeline hours after the Group of Seven agreed to an oil price cap for Russian crude—two opposing blows exchanged between Moscow and the West in an economic war running parallel to the military conflict in Ukraine.

Kremlin-controlled energy company Gazprom PJSC said late Friday it would suspend supplies of gas to Germany via the Nord Stream natural-gas pipeline until further notice, raising the pressure on Europe as governments race to avoid energy shortages this winter.

Gazprom said it had found a technical fault during maintenance of the pipeline, which connects Russia with Germany under the Baltic Sea. The company said the pipeline will remain shut down until the issue is fixed, without giving any timeline.

The pipeline was due to resume work early Saturday after three-day maintenance. Before the maintenance, the pipeline was operating at 20% of its capacity.

Russia first began throttling supplies via Nord Stream in June, saying that needed maintenance was being prevented by Western sanctions imposed following Russia’s invasion of Ukraine. The notion was dismissed by European officials as an excuse for Russian President

Vladimir Putin’s

regime to use its gas exports to punish Europe for its support of Ukraine.

Western leaders are preparing for the possibility that Russian natural gas flows through the key Nord Stream pipeline may never return to full levels. WSJ’s Shelby Holliday explains what an energy crisis could look like in Europe, and how it might ripple through the world. Illustration: David Fang

A complete shutdown of Nord Stream will compel European governments to accelerate their push to become independent of Russian gas ahead of the winter months and could force them to ration energy—a move that would hurt industrial companies and tip the continent’s already fragile economy into a recession.

“By further reducing gas deliveries, Russia is tightening the screws on the EU,” said Janis Kluge, an expert on Russia at the German Institute for International and Security Affairs. “Europe will now have to take its efforts up a notch to conserve more gas.”

At the same time, the move deprives Moscow of its most potent economic leverage on the continent and could remove any remaining misgivings in European capitals about raising sanctions on Moscow for fear of retribution.

“Until it is repaired, gas transport via Nord Stream is completely stopped,” Gazprom said Friday.

Moscow and the West have been engaged in an economic war since Russia invaded Ukraine in February. Western democracies have inflicted economic and financial sanctions on Russia, and Moscow has tried to choke unfriendly countries’ access to its natural gas, which Europe uses for heating and electricity production.

ArcelorMittal SA,

one of the world’s largest steelmakers, was the latest industrial giant to say it is reducing European production capacity amid the energy crisis. The company said Friday it will close two of its plants in Germany amid soaring electricity costs.

Steelmaking is particularly energy intensive, alongside other industries like fertilizer and chemical production and glass making.

G-7 countries said on Friday they would impose a cap on the price of Russian oil. The mechanism would force buyers seeking to insure their shipment via insurers located in a G-7 or European Union country to observe the price limit on their purchases. The cap, whose level will be set at a future meeting, originated in a U.S. initiative and has been under discussion for months.

Russia has said countries imposing a cap wouldn’t receive any Russian oil. Sales of oil make up a far bigger share of Russian state revenues than sales of natural gas.

Inspectors from the United Nations’ nuclear agency visited the Russian-occupied Zaporizhzhia nuclear-power plant, despite shelling near the facility for which Ukraine and Russia exchanged blame. On Friday, Ukraine accused Russia of hindering access to the plant. Photo: Yuri Kochetkov/Shutterstock

Hours before Gazprom’s Nord Stream announcement, German Finance Minister

Christian Lindner

praised the G-7 decision, saying “Russia is generating big profits from the export of commodities such as oil, which is something we must push back on vigorously.”

The cap, he added, would help combat inflation in the EU.

Russia would have enough capacity via other gas pipelines to Europe to compensate for the Nord Stream shortfall. However, flows via these other routes declined following the start of the war in Ukraine.

Ukraine halted one gas-transit route in May, blaming interference by Russian forces. Deliveries through another, called Yamal, which traditionally transported gas from Russia to Europe, have stopped this year due to sanctions imposed by Russia on the Polish part-owner.

Germany’s economy minister,

Robert Habeck,

said this week that the country can’t count on Nord Stream during the winter.

In reaction to the Nord Stream closure, a spokeswoman for the ministry said on Friday that Germany was far better prepared than a few months ago.

“We have already seen Russia’s unreliability in the past few weeks, and accordingly we have unwaveringly and consistently pursued our measures to strengthen our independence from Russian energy imports,” the spokeswoman said.

Klaus Müller, head of Germany’s energy regulator, said the country would need to boost gas imports from other suppliers, continue to fill up gas stores and cut gas consumption.

European officials had expected that the Kremlin would use gas flows to keep markets and governments on edge and erode support for Ukraine among Western voters.

Gazprom’s shutting down of Nord Stream “under fallacious pretenses is another confirmation of its unreliability as a supplier,” European Commission spokesman Eric Mamer wrote on Twitter.

A senior manager of a German gas company formerly controlled by Gazprom said Friday that he expects local importers of gas channeled via Nord Stream to stop paying for their contractual obligations with Gazprom.

Natural-gas prices have broken records in recent weeks amid the energy crunch, though they have also dropped sharply in the past days, with some analysts crediting the speed at which Europeans have been filling up their gas storage facilities through the summer.

Goldman Sachs analysts said that the Nord Stream outage would cause prices to surge again. The Gazprom decision “will reignite market uncertainty regarding the region’s ability to manage storage through winter, driving a significant rally,” the bank said in a note to clients.

Gazprom began throttling gas flows in June, citing technical problems with the turbines. The company insists that a key turbine couldn’t be sent to Russia after it was maintained in Canada because of international sanctions on Moscow. But Germany, where the turbine was located, said that there are no obstacles, and that Moscow was in fact blocking the turbine’s return to Russia.

On Friday, Gazprom said that it found an oil leak in a turbine at the compressor station of the pipeline. Gazprom said that similar issues had been found with other turbines this summer that have led to the reduction of the gas flows.

Gazprom said it had notified German company

Siemens Energy AG

, which maintains the turbines, of the new leak. Gazprom said that the necessary repairs could only be done in a specialized repair facility. Previously, some turbines for the pipeline had been repaired by Siemens Energy in Canada.

Siemens Energy said that Gazprom’s announcement wasn’t a technical reason for stopping operation. “Such leakages do not usually affect the operation of a turbine and can be sealed on site. It is a routine procedure during maintenance work,” the company said. It said it wasn’t currently contracted for maintenance work but is ready to assist.

Europe has been preparing for a possible Russian gas cutoff, with EU gas- storage facilities filling up faster than expected this summer, to over 80%.

Still, if Nord Stream remains shut, Europe’s gas stores would end the winter at 26% of their capacity, which would complicate Europe’s situation next winter, Massimo Di Odoardo, vice president for gas and liquefied natural gas research at energy consulting firm Wood Mackenzie, wrote this week.

Germany, which received more than half of its gas from Russia before the war in Ukraine, has been racing to diversify its supply of gas and to install floating liquefied natural gas terminals to ship in gas from the U.S. and elsewhere. In recent months, Germany’s gas imports from Norway, Belgium and the Netherlands have far outweighed the reduced Russian flows.

The country is close to hitting its 85% gas storage target, initially set for Oct. 1. German officials, however, have warned that reaching the next milestone of 95% by Nov. 1 would be challenging unless companies and households cut consumption.

The 760-mile-long Nord Stream pipeline first opened in 2011. Russia and a consortium of European energy companies built a second pipeline, Nord Stream 2, running alongside the original one, that would have doubled capacity. But the German government froze the project in February over the war in Ukraine.

—Bojan Pancevski contributed to this article.

Write to Georgi Kantchev at georgi.kantchev@wsj.com and Andrew Duehren at andrew.duehren@wsj.com

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World

Russia Resumes Nord Stream Natural-Gas Supply to Europe

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BERLIN—Russian natural gas began flowing again at a reduced volume through a critical pipeline into Europe on Thursday, according to its operator, buying time for governments to decouple from the Kremlin’s exports amid what they expect will be an increasingly unreliable supply of energy from Moscow heading into the winter.

The Nord Stream pipeline connecting Russia with Germany under the Baltic Sea resumed operation after its annual maintenance, ending 10 days of tense speculation about whether President

Vladimir Putin’s

regime would cut off the gas flow to Europe in retaliation for Western sanctions after his invasion of Ukraine.

The operator, Nord Stream AG, said the pipeline was in the process of restarting, which would take a few hours. “Gas is flowing,” a spokesman for the operator said.

The spokesman said flows are expected to be at pre-maintenance level of around 40% of total capacity, but it would take a few hours to reach that volume. One of the German network operators, NEL Gastransport GmbH, later said Thursday that this volume of gas was currently flowing through the pipe, as also confirmed by Nord Stream’s own online monitoring tool.

The German energy regulator said gas flows could reach 40% of capacity Thursday.

“Unfortunately, the political uncertainty and the 60% cut from mid-June remain,” the regulator’s head, Klaus Müller, said on Twitter.

The restart sent wholesale European natural-gas prices down 5% Thursday to €154.55, the equivalent of about $157.50, a megawatt-hour. Including Thursday’s fall, prices have fallen by 14% over the past week but have more than doubled this year and are more than four times as high as 12 months ago. The rally has propelled electricity prices to historic highs across Europe. Broader financial markets were steady Thursday as investors awaited earnings reports from major U.S. companies and an expected interest-rate increase by the European Central Bank.

A compressor station in Mallnow, Germany.



Photo:

filip singer/Shutterstock

The pipeline has been operating below capacity since Russia began throttling supplies in June, invoking technical issues related to Western sanctions against Russia.

Mr. Putin earlier this week said Russia would meet its contractual obligations for gas deliveries to Europe. The Nord Stream pipeline is the main conduit for Russian gas into Europe. Mr. Putin also warned that Western sanctions adopted to punish Russia in the wake of the invasion could cause further disruptions and cap pipeline volumes as low as 20%.

European officials and executives had worried the pipeline might not restart at all, or do so at even lower volumes. While gas is now flowing again, how much Russia sends—and for how long—will be closely watched by European capitals, who are in the midst of filling reservoirs for the higher-demand winter just a few months away.

An abrupt cutoff would have pushed Germany, Europe’s largest economy and industrial powerhouse, and several of its neighbors into a severe recession, according to most economists. But even reduced flows and the uncertainty regarding future supplies mean governments may still be forced to ration energy and subsidize mounting costs for households, experts and officials say.

Nord Stream channels gas extracted from Siberia by state-controlled Gazprom PJSC.

Mr. Putin this week blamed the drop on the absence of a turbine that had been held up in Canada after undergoing repairs because of Western sanctions, but is now on its way back to Russia.

Berlin and most Western experts said the cut in supplies was an attempt to pressure the West into easing sanctions and to push up gas prices. Several German officials and a Gazprom manager in Europe told The Wall Street Journal that Nord Stream had an elaborate contingency system with at least one spare turbine available at all times.

German officials say they expect the pipeline to continue to operate at its reduced pre-maintenance capacity—a level they think was deliberately set to prevent Germany and others from building up enough gas reserves for the winter. Because of technical reasons related to the pressure levels in the pipeline, Nord Stream can’t transport volumes below 30% of its capacity of 55 billion cubic meters a year.

A German government minister said that Mr. Putin was deliberately causing anxiety in the global energy markets, but that he was unlikely to sever supplies completely because it would remove his leverage and risk a harsher response from the West.

The reduced flows and uncertainty are already hitting Germany’s economy. The largest gas utility,

Uniper SE,

is in bailout talks with the German government. The company said Monday that it had drawn down a €2 billion, or $2.04 billion, credit line with German state-owned KfW bank. A German Economy Ministry spokesperson said Monday that the government was working with Uniper and its Finnish parent,

Fortum Oyj,

to find ways to help the company.

Germany and other European Union nations, which pledged to end purchases of Russian energy by 2024, are now working on two basic contingency plans.

The Nord Stream pipeline has been operating below capacity since Russia began throttling supplies in June.



Photo:

Markus Schreiber/Associated Press

The first envisages a status quo, with Nord Stream operating at around 40% of its capacity. Under that scenario, Germany, where gas storages are currently 65% full, would have to significantly reduce consumption compared with the previous year to avoid a shortfall in the winter. Some regions, however, are expected to be more severely affected, possibly triggering local measures such as limited factory shutdowns and a cut in supply to some businesses.

Under this scenario, Germany would be unable to completely fill its reserves before year-end, leaving the country vulnerable to new surprise supply cuts and keeping energy prices high.

This could be politically explosive for Berlin, with some 66% of Germans currently feeling that the government isn’t doing enough to tackle high energy prices, while 53% believe the sanctions are hurting Germany more than Russia, according to a Forsa poll published on Wednesday.

“We need to prepare for a war economy…the next two winters will be difficult,” said

Günther Oettinger,

a former chief energy official of the EU and German politician. “Our very democracy is in danger of disruption from the energy costs fallout.”

The second scenario, seen in Berlin as less likely according to German officials, foresees an end to Russian gas supplies before the end of the year, triggering an emergency plan that would allow Chancellor

Olaf Scholz

to take control of the gas market and ration consumption.

Under legislation that protects households and critical infrastructure, rationing would hit mainly businesses, leading to a drop in Germany’s gross domestic product of between 5% and 6% in 2023, according to estimates by

Deutsche Bank.

With many European countries that depend on Russian gas reliant on supplies transiting through Germany, irregular or dwindling supplies through Nord Stream would have effects across the continent.

The EU this week issued guidelines recommending measures to cut gas consumption by 15% between August 2022 and March 2023, including by limiting the temperature in office spaces to 66 degrees this winter.

Germany’s immediate neighbors are working on their own contingency plans.

Germany and Austria negotiated a deal to share their gas-storage capacity and help each other’s regions that are at risk of fuel shortages.

“Russian dictator Vladimir Putin is using energy as a weapon against us. It is clear that the cooperation with Germany, through which almost all gas flows to us, will be essential for us in this direction,” Josef Sikela, the minister of industry and trade of the Czech Republic, told reporters earlier this month.

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Europe is also adjusting its gas infrastructure, which has so far been largely geared to receive supply from Russia. Belgium and Germany are working to expand the capacity of a pipeline connecting the two nations, while Austria and Italy are looking into importing their infrastructure to be able to channel more Norwegian gas into their storage.

The Netherlands, once among the world’s largest gas producers, is considering temporarily prolonging the life of a gas field scheduled for closure after mining work there caused numerous earthquakes.

Many governments are trying to secure gas from other suppliers, from Norway to Algeria, the U.S. and Qatar, which often comes in the form of liquefied natural gas transported by ship.

Germany is building several LNG terminals on its coast to receive shipments from faraway countries and has chartered five floating terminals that can handle those inflows in the short term. Increased LNG purchases by EU nations—Germany alone is investing over €15 billion—have caused a shortage on the global market, leaving countries such as Pakistan struggling to access supply.

Berlin, meanwhile, has said it would review its decision to shut down its three remaining nuclear-power plants. It is already planning to increase use of coal to produce electricity this winter to save gas for heating.

Write to Bojan Pancevski at bojan.pancevski@wsj.com and Georgi Kantchev at georgi.kantchev@wsj.com

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