Europe faces potential gas crisis

LONDON - Europe faced a potential energy crisis on Sunday after Russia started cutting gas flows to Ukraine amid a bitter dispute over prices.

Europe gets about a quarter of its gas from Russia, most of it pumped west via Ukraine. Today's move by Russia, which wants Ukraine to pay much more for its gas, comes as European demand hovers near peak levels because of freezing weather.

Analysts say Ukraine could defy Russia and continue drawing gas from transit pipelines, reducing the volumes bound for European customers.

Industry sources said utilities across the continent were on standby to open the taps on back-up storage depots and to ask for more gas from other suppliers like Norway and the Netherlands to safeguard flows to industrial consumers.

This despite reassurances from Russian state-controlled energy giant Gazprom that flows to Europe would not be hit by the move against Ukraine.

"Our members hope that there is enough gas in storage for the next two to three months," said Wulf Binde, senior gas specialist at the VIK industrial energy consumers' association in Germany, the biggest buyer of Russian gas.

"There could be some questions over pipeline capacity within Germany if we have to get gas from other suppliers," he said. "Gas will have to be moved within Germany and that could be a problem."

Germany's biggest supplier, E.ON Ruhrgas, which gets about a third of its gas from Russia, has said it could cope with disruptions as its storage tanks are full.

Italian utility Eni said on Saturday that Gazprom had advised it that gas supplies could be put at risk by the dispute with Ukraine.

European Union officials are due to meet for emergency talks on January 4 to discuss the situation.

Aside from Germany, Russian gas goes to Italy, France and Austria, as well as central European markets including Poland and Hungary, which say they have been preparing for supply disruptions.

- REUTERS