Winter will ask stricter – Kommersant

The rate of decline in EU gas consumption in 2023 may slow down, according to a new study by McKinsey & Company. Analysts believe that the balance of the European energy market, which in 2022-2023 is largely due to a mild winter, could be seriously affected by an increase in LNG imports in Asia, the inability to reduce consumption in many industries, as well as hotter summers and colder winters. It is assumed that “decisive actions of the authorities” can help the energy market in Europe, including the accelerated energy transition actually sanctioned by the EU Council last week.

Records associated with the high rate of reduction in European gas consumption may be in the past, analysts at McKinsey & Company predict in a new study “The Balancing Act: Ensuring the Security of the European Gas and Energy Market.” Recall, according to the latest data from Eurostat, for the period from August 1, 2022 to March 31, 2023, the EU managed to reduce gas consumption by 17.7% in annual terms (the plan of the European Commission for the summer of 2022 assumed a decrease by 15% – for more details, see “Kommersant” dated 21 April). However, repeating this success will be more difficult, analysts believe.

Before the start of the military operation in Ukraine, Russia supplied almost a third of European natural gas, after which the flow was more than halved: from 140 billion cubic meters. m in 2021 to 65 billion cubic meters. m – in 2022. The turmoil in the European energy market led to a multiple increase in prices: European countries spent € 1 trillion more on oil, gas and coal in 2022 than in 2021. Although prices began to decline in late 2022, EU energy spending is projected to remain above 2021 levels until at least 2025, McKinsey said.

Some of the lost Russian volumes were replaced by LNG: its imports to Europe increased by 64 billion cubic meters. m compared to 2021. Part of the consumption was reduced due to a mild winter (see Kommersant of April 14) – as experts feared, this led to a significant reduction in production in energy-intensive industries such as fertilizer production, the chemical industry and metallurgy in 2022 ( Thus, the production of fertilizers in the third quarter of 2022 decreased by 50% compared to the level before the start of the Russian military operation in Ukraine). At the same time, in order to stabilize the market in 2023, Europe will need to reduce gas consumption by another 55 billion cubic meters. m, analysts say, and even this may not be enough for the next heating season.

A serious problem is, for example, the revival of the economies of Asia (mainly China) and the growth of their demand for LNG, which turns into competition with Europe. Recall that in 2022, the largest consumer of LNG – China – due to the situation with COVID-19 (in particular, the policy of “zero tolerance” to the virus), for the first time in 40 years, reduced LNG purchases – by 21% (after an increase of 17% a year earlier). ). Europe, which had previously been less interested in LNG, in 2022, on the contrary, bought it at high prices. Due to the “role reversal” that has taken place, China, as Shell previously noted, “has received a more flexible role from a rapidly growing import market with an increased ability to balance the global LNG market” (see Kommersant on February 17). Note that LNG demand in China this year, according to Focus Economics forecasts, may increase by 9-14%, which will support prices at a level 3.5 times higher than the average in 2016-2019.

The weather can also make adjustments to plans to further reduce gas consumption, McKinsey notes: a heat wave is expected in the EU in the summer, which will increase the demand for electricity, on the one hand, and reduce its generation (in terms of hydroelectric power plants), on the other. Underground gas storage, which was 55% full by the end of March against a five-year average of 35%, could be reduced, analysts predict, and a colder winter is likely to boost demand by an additional 15 billion cubic meters. m.

According to McKinsey & Company, “decisive action” by the authorities can help the European energy market. The report refers, in particular, to political initiatives around the climate program “Fit for 55 in 2030”, which assumes a serious reduction in CO2 emissions by 2030. In fact, Europe has already begun to stimulate an accelerated energy transition: last week, the EU Council adopted several laws related, in particular, to the reduction of free emission quotas (see Kommersant of April 26).

Christina Borovikova