French strikes slow recovery from European energy crisis

Europe survived the most dangerous stretch of its energy crisis without major supply disruptions. Then workers in France went on strike and sparked activity from ports to power plants.

The unrest, protesting President Emmanuel Macron’s proposed pension reform, began in January but has gained momentum in the past six weeks. Electricity prices have soared, ships carrying fuel have diverted from the country’s shores, and the nation has burned through much of its natural gas reserves.

Labor actions at nuclear and hydroelectric plants have cost utility Electricite de France SA about 1 billion euros ($1.1 billion) in lost production, according to people familiar with the matter. The broader toll on the economy is yet to be determined.

France is normally a European energy powerhouse, but the outages have come at a crucial time. The region is reeling from its worst supply crisis in decades, after Russia cut off gas flows following its war in Ukraine. French nuclear power, the mainstay of the nation’s electricity supply, has been hampered for months by reactor outages.

Some activity at energy facilities is beginning to pick up as the protests begin to subside. Even so, the effects of weeks of turmoil have spread across the continent. As Europe struggles to recover, it does so with one of its key energy pillars weakened. Here is an overview of the situation.

Gas struggles

Three of France’s liquefied natural gas terminals have been largely blocked by strikes since early March. A fourth, Dunkirk LNG in the English Channel, faces regular outages. Ships carrying the fuel have been diverted to countries such as Spain and the United Kingdom.

Loading at one of the closed facilities, the Montoir d’Elengy SA terminal, will be able to resume in the coming days. But the country has already suffered a serious impact on LNG imports. Flows fell by 1.1 million tonnes from February to March, mainly due to strike disruptions, ship tracking data show. That’s about €650 million worth of LNG, according to Bloomberg calculations.

France has deepened its inventories of gas for heating and electricity, with its gas reserves lower than in 2019. The country’s storage sites are only 29% full, according to data from Gas Infrastructure Europe. Although slightly higher than the historical average, it compares with 65% in Germany and 56% for Europe as a whole.

One potential bright spot: Because its neighbors have relatively high inventories, France may face less regional competition to fill them this summer.

Nuclear evils

French energy security rests on the shoulders of the country’s fleet of nuclear reactors, the largest in Europe. But maintenance and unplanned outages due to cracked pipes at a dozen units last year caused nuclear output to fall to the lowest level since 1988.

The strikes have further slowed production and reactor restarts in recent months. As a result, EDF’s nuclear output fell 7.4% in the first quarter from a year earlier, the company said, rekindling concerns about near-term nuclear power supplies.

A few weeks ago, the nuclear regulator ordered EDF to review its reactor control program due to the discovery of new cracks earlier this year. He also hinted that inspections of a handful of units would have to be moved forward, creating uncertainty about future disruptions.

Power increase

The combined blow of strikes and renewed nuclear concerns has sent French electricity prices soaring. Futures for the supply of energy next year have risen by approximately 50% since the beginning of March, to more than 220 euros per megawatt-hour. While this price pales in comparison to August’s record highs, it is much higher than the equivalent German contract.

Europe was spared blackouts and energy rationing over the winter, largely due to mild weather and efforts to conserve energy, while soaring prices last year dampened industrial demand. The French government has recently urged businesses to seek more savings, particularly by encouraging more work from home, to reduce electricity bills and reduce fuel consumption on the roads.

Oil crackling

As with LNG facilities, the strikes halted operations at France’s fuel terminals, oil refineries and petrochemical plants. Tankers have also been diverted to countries that are capable of offloading oil cargoes.

According to researcher Facts Global Energy, France has relied more heavily on fuel inventories during this round of strikes than during separate outages in October, due to disruptions at ports. Meanwhile, the French government has released more than 3 million barrels of crude from its strategic reserves since early March.

France has six major oil refineries, and while operations have recovered to some extent, the damage from the strikes could linger. It can take weeks for some plants to regenerate because of how long they were out of service, FGE said.

–With assistance from Eamon Akil Farhat, Rachel Graham, Josefine Fokuhl, Sharon Cho and Elena Mazneva.