Europe denies itself gas
Europe continues to take steps to reduce dependence on pipeline and liquefied gas in general, and primarily from Russia. In particular, the EU Council approved a "gas package" involving the transition to renewable resources, and also extended for a year restrictions on gas consumption by 15% and allowed countries not to accept Russian LNG. Experts consider this path to be risky, given the instability of renewable energy generation and problems due to savings in industrial enterprises with loading.
The Council of Energy Ministers of the European Union agreed on a common position to start inter-institutional negotiations on a "gas package" for the transition from natural gas to renewable energy sources and clean raw materials. The participants agreed to extend for a year, until March 31, 2024, the mechanism for voluntary reduction of gas demand in the EU by 15%. Also, said European Commissioner for Energy Kadri Simson, the proposal for a "gas package" included the possibility for the countries of the union to limit the use of their infrastructure for receiving gas, including LNG, from Russia and Belarus. In general, Brussels insists on a complete rejection of purchases of Russian liquefied gas.
As stated in the popular statement Based on the results of the meeting, savings measures are necessary to ensure the reliability of supplies, maintain price stability and guarantee the filling of underground gas storages (UGS) by the next heating season to the level of 90% by November 1.
At the same time, the EU Council retained the right to make the reduction of gas consumption mandatory in an emergency.
Hungary and Poland opposed this measure during the meeting, but despite this, the decision was made by a majority vote, said Hungarian Foreign Minister Peter Szijjarto. In his opinion, the restrictions are dangerous and do not solve the problem of energy shortage, taking into account the refusal of Russian gas. He estimated the shortage of raw materials at 60 billion cubic meters, which cannot be replaced on the world market in the near future. When the EU, against the backdrop of a recovery in demand in China, has to look for new sources and routes for the delivery of energy, notes Peter Szijjarto, he decides to reduce gas consumption, which is fraught with a slowdown in economic development.
The initially coordinated restriction of gas consumption was in effect from August 1, 2022 to the end of March 2023. Its main goal was to establish a balance in the global gas market and contain prices, which by the middle of last year, although they moved away from their March peaks, when the price reached $3.9 thousand per thousand cubic meters, remained at a high level, exceeding $2 thousand per thousand cubic meters.
In autumn, quotations fluctuated in the range of $1-2 thousand per thousand cubic meters. Against this background, the injection of gas into European UGS facilities up to the level of over 95% cost companies, according to calculations Bloombergalmost $105 billion.
At the beginning of the year, the high level of gas reserves in the EU, thanks to a warm winter, put pressure on quotations, which by the end of March 2023 fell below $500 per thousand cubic meters (as of March 28, gas was traded at $480 per thousand cubic meters).
Vyacheslav Mishchenko of Gubkin University's Center for Analysis of Strategy and Technologies for the Development of the Fuel and Energy Sector believes that against the backdrop of EU decisions, the prospects for Russian gas in this market, the supply of which has already reached a historic low last year, are extremely negative. In his opinion, in 2023 the export of raw materials to the EU will continue to decline rapidly.
At the same time, not only Gazprom and the Russian budget suffer from the reduction, but also domestic industrial production, primarily the mineral fertilizer sector and metallurgy, which are forced to reduce load, the expert says.
He notes that the European energy sector, which has relied on renewable energy sources, has entered a risky zone: the warm weather in winter helped to successfully pass the current heating season. And with the next one, many questions remain, since it is now impossible to replace the departed Russian volumes, given the mobility of LNG, whose suppliers can easily redirect volumes to more profitable markets.