German firms weigh options to save gas, warn may need to cut output

* Germany's export industries brace for further gas cuts

* Chemical industry can save 2%-3% of gas by fuel switch

* Engineering firms could cope with 20%-40% less gas in short term

* Further savings will mean lower production, companies warn

* Gas-auctioning government platform to go online in October

By Victoria Waldersee and Riham Alkousaa

BERLIN, July 26 (Reuters) - German firms are attempting to reduce gas use in response to a government plea to spare reserves, but savings may be limited without production cuts, companies and industry associations across autos, chemicals and engineering told Reuters.

Switching from gas to other fuels, such as coal or oil as a short-term solution is possible for companies with burners on-site, but Berlin needs to help by speeding approvals for resulting higher carbon emissions, associations said.

Mercedes-Benz MBGn.DE said it is now replacing its natural gas-fuelled combined heat and power plants with green electricity, declining to specify what type.

Germany's car association VDA said others were also exploring a similar measure - but if the entire auto industry made the switch, its electricity demand on the grid would rise up to 15%, it warned.

"Both options imply cost increases for industry and require a stable electricity grid as well as quick bureaucratic approval for fuel switching," VDA president Hildegard Mueller said, referring to a switch to electricity from the grid or oil.

In its push to curb its reliance on Russian gas after Moscow's invasion of Ukraine, Germany has already cut the share of gas in its electricity production to around 6% this year from 15.2% last year and has permitted reconnecting coal-fired power plants to the grid.

Germany's gas-guzzling chemicals industry could lower gas consumption by 2% to 3% by fuel switching, national chemical industry association VCI told Reuters.

Germany's energy regulator, the Bundesnetzagentur, is currently assessing data from the country's 2,500 biggest industrial gas consumers on their needs and emergency reduction plans to set up a so-called "gas safety platform," due to go live in October.

The government will also allow large gas users to auction contracted gas volumes they will not use to stabilize the market.

Still, it is an open question whether any companies will have gas to spare, industry representatives contacted by Reuters said. And given limits on fuel switching, more substantial gas savings were likely to require lowering production or shifting it abroad, they warned.

Whether companies would opt for cutting production to save energy would depend on the auction model and whether potential government compensation for gas savings outweighed the cost of production losses, VCI energy expert Joerg Rothermel said.

"One or the other product would no longer be produced, or perhaps bought somewhere else on the global market. We would be losing added value," said Matthias Zelinger, climate expert at German engineering association VDMA, said.

Germany's engineering companies could cope with 20-40% less gas in the short term but there has to be less red tape required to switch fuels, change shifts or reduce workplace temperatures, he said.

"We're losing time... this is the time to save and store gas to have enough stocks for winter," Zelinger said.

BMW BMWG.DE said it was already reducing its gas intake but further savings were only possible for a limited period without jeopardising output.

"The entire industry must be taken into account and savings managed centrally in order to ensure neutrality in competition," a spokesperson for the premium carmaker said.

Bosch, the world's largest auto supplier, said it had lowered the temperature in offices and logistics spaces, as has Volkswagen's VOWG_p.DE premium car brand Audi.

"These measures largely exhaust the potential for short-term energy savings," the VDA's Mueller said. "Any further cuts would involve far-reaching interventions into production, with consequences for employees and suppliers."
Reporting by Victoria Waldersee, Riham Alkousaa Editing by Tomasz Janowski

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.