Bracing for Russian gas cuts, EU readies plan to cut demand

© Reuters. FILE PHOTO: Pipes at the landfall facilities of the 'Nord Stream 2' gas pipeline are pictured in Lubmin, Germany, March 7, 2022. REUTERS/Hannibal Hanschke

By Kate Abnett

BRUSSELS (Reuters) - The European Union will set out emergency plans on Wednesday to reduce gas demand within months, warning countries that without deep cuts now they could struggle for fuel during winter if Russia cuts off deliveries.

Europe is racing to fill its gas storage ahead of winter and build a supply buffer in case Moscow further restricts supplies in retaliation for European support for Ukraine in its war with Russia. Russia's Gazprom (MCX:GAZP) has already halted deliveries to some EU states and EU officials have warned that further cuts are likely.

The European Commission is set to urge countries to prepare for such a scenario by slashing gas use. A draft of the EU plan, seen by Reuters, would propose a voluntary target for EU countries to cut their gas demand over the next eight months, which could be made legally binding if Europe faced a gas supply emergency.

The proposal would need approval from EU countries, who are largely responsible for their own energy policies.

"This is a signal to all public bodies, consumers, households, owners of public buildings, power suppliers and that they must now take extraordinary and rapid measures to save gas," the draft said.

The exact number for the reduction target was not specified in the draft, which could change again before it is published.

The draft plan suggests measures governments can take - launching financial incentives for companies to cut gas use, using state aid to encourage industries and power plants to switch to other fuels, and producing information campaigns to nudge consumers to use less heating and cooling.

Measures targeting industry could include auctions or tenders where large consumers would receive compensation for using less gas, according to the draft, which could change before it is published.

Governments should also decide the order in which they would force industries to close in a supply emergency, it said.

Gas deliveries are due to restart through Russia's Nord Stream 1 pipeline to Germany on Thursday, after annual maintenance.

There have been fears among governments that flows will not restart, which would heighten a gas crisis that has sent consumer bills soaring. Sources told Reuters that flows would likely resume, but at below full capacity.