14.10.2022 | How Axpo plays a key role in finding alternatives to Russian gas
With the conflict in Ukraine creating ongoing uncertainty around the delivery of gas from Russia, Axpo helps to ensure Switzerland has security of energy supply over the coming winter.
Active in the mid and downstream business of natural gas and liquefied natural gas (LNG), Axpo is the only energy company in Switzerland able to provide the expertise needed to transport, store and trade natural gas and LNG both in and outside the country. As such, it is supporting the Swiss Gas Task Force – set up by the Federal Office of Energy (Bundesamt für Energie) - to find solutions to the supply challenge currently facing Switzerland.
To guarantee security of supply during winter, when energy use is at its highest (peak consumption in Switzerland is usually in January and February at approximately 4TWh a month), the five regional suppliers (Gaznat, GVM, EGZ, EGO/OpenEP and AIL) that buy and distribute gas in Switzerland have been instructed to secure 6 TWh of gas storage for Swiss use.
The suppliers also need to secure an additional 6 TWh of gas to be provided in ‘swing options’ – flexible arrangements to supply gas at short notice if needed.
Consumption of gas in Switzerland is currently about 3 to 4 billion cubic metres or 30 to 40 TWh per year, with just under 70% brought into Switzerland through Germany, a little under 30% through France and approximately 1% through Italy.
The challenge is that Switzerland has no gas storage capacity of its own, so storage flexibility has to be provided by facilities in neighbouring countries. This is the main reason why Swiss regional suppliers have organised their 6 TWh gas storage in Germany, France and Italy.
Regarding alternative sources of natural gas, at the moment LNG is the most common option. However, with LNG terminals currently at full capacity, finding available additional capacity is difficult. Italy in particular provides a potentially important source of additional supply to Switzerland, with plenty of south-to-north reverse flow capacity through pipelines and few bottlenecks.
To help address this challenge, Axpo has offered storage capacity at facilities in Italy run by its Italian subsidiary.
In addition, Axpo is offering swing options – for the amount that must be sourced by Swiss regional suppliers – using gas transported through the Trans Adriatic Pipeline (TAP) to Italy.
Axpo is also playing a part in addressing the general supply issue in Europe, which has a knock-on effect on supplies to Switzerland, by ensuring that LNG reaches Europe. One such cargo carrying 1 TWh of LNG corresponds to the annual consumption of 40,000 households.
On average, Axpo imports 25 to 30 LNG cargos a year into Europe and is one of the major LNG market participants in Iberia, the most important LNG hub in Europe. Iberia has enough LNG regasification capacity to cover one third of Europe’s gas consumption. Axpo is also an active player in exporting gas from the West (e.g Spain) and the South East (e.g Greece) to Central and Eastern Europe, where gas is urgently required due to the drastic reduction of supplies from Russia.
A co-founder of the Trans Adriatic Pipeline, Axpo has long promoted the diversification of gas supplies. It has secured long-term gas supply contracts through TAP and has commenced discussions for the sale of mid-term volumes of gas to be transported through TAP and onward to Swiss utilities as an alternative to Russian supplies.
Gas, and especially LNG, is playing an increasingly important role in the global transition to a low-carbon economy. Generating around 50% less greenhouse gas emissions than coal, it is a cleaner ‘bridging’ energy source in the transition to a CO2 -and fossil fuel-free future.
For nearly 20 years, Axpo has been actively trading natural gas across Europe. This includes the cross-border transport of natural gas, the trading of LNG – starting more than a decade ago – and the supply of natural gas to customers ranging from SMEs to large energy-intensive industrial companies. In Switzerland, Axpo already delivers around 1TWh of gas a year to some of its larger customers.