Permafrost – Newspaper Kommersant No. 231 (7432) of 12/13/2022
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Europe is starting to prepare for the hardships of next winter. According to the forecasts of the International Energy Agency, gas in 2023, if Russia completely cuts off gas supplies, and China begins to restore its consumption, the EU countries will face a shortage of 57 billion cubic meters. Especially given that the market is still not expected to have a new supply of LNG. According to analysts, against this background, competition with Asia for liquefied fuel may intensify in 2023, and more realistic ways to replace Russian gas will appear only after 2025.
EU countries should have enough gas for this winter, but the continent could face gas shortages next year if Russia cuts supplies even further, the International Energy Agency said Dec. 12 (IEA).
After the outbreak of hostilities in Ukraine, Russia gradually reduced gas supplies to Europe, leaving only one transit line through Ukraine as a result (the Nord Stream and Nord Stream 2 pipelines were then blown up by unidentified persons and are not working). But Europe has so far managed to avoid an acute shortage of gas – the EU countries began the winter season with underground storage facilities (UGS) filled, and due to warm weather, the selection started much later than usual. High gas prices have helped reduce consumption. Now northwestern Europe has been gripped by extreme cold, but gas prices are stable: the continent is still insured by the flow of large quantities of LNG from the United States and Qatar.
€330 billion
spent by EU countries since November 2021 on supporting consumers in the face of rising energy prices
However, there are fears in the market that the EU countries will use up all UGS stocks by April, and their replenishment by next winter will be more difficult due to a shortage of supplies. European officials expect next year to be tougher than this one. So, if the Russian Federation reduces the minimum volumes of pipeline supplies that it still continues to carry out (about 60 billion cubic meters in 2022 against 140 billion cubic meters in 2021), LNG supply will remain limited, and gas demand in China will recover after the lifting of restrictive measures, related to COVID-19, the EU could face a gas shortage of 57 billion cubic meters in 2023, the IEA expects.
“We seem to be off the hook this winter,” said IEA chief Fatih Birol, adding that “the crisis is not over yet and 2023 could be a lot harder than this.” In addition, “no one can guarantee that next year’s temperatures will be as mild,” he said.
The total gas consumption in the EU in 2021 amounted to 412 billion cubic meters. According to the IEA, gas demand in Europe in 2022 will fall by about 10%, or about 50 billion cubic meters (of which 10 billion cubic meters are the effect of reduced production).
According to the IEA, up to 30 billion cubic meters of deficit in 2023 can be closed through the already implemented measures to improve energy efficiency, increase the share of renewable energy in the energy mix, replace fossil fuel-based heating systems with heat pumps, and increase the generation of nuclear and hydropower. To replace the remaining 27 billion cubic meters, additional measures will be required to improve energy efficiency, modernize buildings and expand the use of renewable energy.
But these measures “will not be free.” “They will cost €100 billion in one year,” Mr. Birol said. According to him, these investments will pay off within the next two years and will bring great benefits.
However, the European Union, according to the IEA, may have to help Ukraine and Moldova replenish gas storage facilities. In particular, Ukraine runs the risk of being left with depleted UGS facilities by March 2023 even if gas consumption is reduced by 25%. “Ukraine and Moldova will need about 12 billion cubic meters of gas imported from the EU in the summer of 2023 to replenish their storage facilities by the start of the 2023-2024 heating season,” the report says.
The head of the European Commission, Ursula von der Leyen, expects the EU to purchase up to 130 billion cubic meters of gas in 2023, which is comparable to the supply of the current year. In her opinion, the block needs to accelerate the introduction of renewable energy sources and intensify measures aimed at improving energy efficiency, as well as start joint gas purchases.
EU leaders will begin discussing measures to prepare for the upcoming winter at a summit in Brussels on December 15.
With the current volumes of Russian gas supplies next year, Europe will have to look for an alternative to at least another 50 billion cubic meters, Sergey Kapitonov, an expert at the Center for Energy Transition and ESG Skoltech, expects. At the same time, there are serious problems in terms of LNG supply, he adds. So, until the end of 2022, only the commissioning of a floating LNG plant in Mozambique for 4.5 billion cubic meters is expected, the completion of the construction of several production lines in the United States and the completion of the repair of the Freeport LNG plant. No significant LNG inflow to the market is expected in 2022–2023. The planned capacity expansion in Qatar will not take place until 2027, with new US projects coming online in the mid-2020s. “Under such conditions, next year and in the medium term we should expect increased competition in Europe and Asia for LNG, which in turn will put pressure on prices,” he believes.
Against this background, according to him, the only possible options for reducing the consequences of the gas crisis could be the unblocking of the remaining gas pipelines from the Russian Federation or the continuation of the policy of reducing gas consumption and deindustrialization. “In the long term, the EU has a large number of options for replacing Russian gas, but this is a horizon after 2025, rather closer to 2030,” he believes.
The IEA estimates the volume of new LNG on the market at just 23 billion cubic meters. The report notes that if China recovers its LNG consumption after the failure of the current year, then Europe will get very little of these new volumes. “This means that the developing countries of the Asia-Pacific region will have to forget about any increase in demand for LNG at least next year, and this despite the fact that this year many of them have even reduced their consumption,” says independent expert Alexander Sobko.
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