The EU is struggling to store gas for the winter. In order to reduce dependence on Russia, EU countries are working to fill natural gas tanks before winter arrives.
Release: 11:27 – 21 September 2023 Updated:
Following the Russia-Ukraine War, the European Union (EU) is trying to reduce its dependence on Russia, the largest natural gas supplier. In this context, EU countries are trying to fill their natural gas tanks before winter arrives.
However, experts state that a mild winter is critical for the EU, which suffered from high gas prices last year.
European gas markets have been experiencing constant volatility in recent months due to extreme temperatures, maintenance at gas plants and ongoing strikes at major liquefied natural gas (LNG) plants in Australia.
ENERGY CRISIS IS DEEPENING
The energy crisis, which grew due to the supply-demand imbalance that emerged with the Covid-19 epidemic and supply concerns triggered by the Russia-Ukraine War, deepened further when Russia largely stopped gas exports to Europe.
Gas prices, which had increased since the beginning of the energy crisis, continued to rise rapidly after the war, and August 2022 was recorded as the date when the gas price per megawatt-hour broke a record, exceeding 300 Euros.
Gas prices decreased thanks to the absence of any major outages during the winter period, low temperatures and the EU’s measures to reduce gas demand. Prices, which completed August at 35 Euros per megawatt-hour ($396 per 1000 cubic meters), dropped to 31 Euros ($350 per 1000 cubic meters) in September.
However, in recent days, gas prices have started to rise again due to increasing energy demand in Europe and concerns that Russia will reduce its gas exports.
Yesterday, prices in TTF October futures contracts closed at 37.28 Euros per megawatt-hour ($422 per 1000 cubic meters). Prices, which rose to 39.6 Euros during the day, decreased by 9.8 percent compared to yesterday’s closing and were traded at 35.7 Euros per megawatt-hour as of 09.36 Turkey time.
EU IS COMING TO BUY LNG FROM RUSSIA
EU countries, which embargo Russian oil and coal and exclude natural gas, have committed to ending all Russian fossil fuel supplies by 2027. Europe tried to compensate for the gap arising from Russian gas by increasing LNG imports by 60 percent.
Last year, EU countries made 44 percent of their total LNG imports from the USA, 17 percent from Russia and 13 percent from Qatar. Kadri Simson, EU Commission Member Responsible for Energy, expressed the discomfort felt by the situation and called on all companies and member states to do their part.
Speaking at the Energy Security Conference held in Warsaw, the capital of Poland, Simson pointed out that the supply concerns experienced before winter last year did not exist this year, and stated that the situation in Europe is currently better than anyone could have predicted.
Recalling the record gas prices in Europe a year ago, Simson said, “Beyond market volatility, we also need to take into account hot summers, cold winters, unplanned nuclear outages or limited hydropower supply. All of this could lead to more gas being used for electricity generation in Europe. “But for now, the outlook is much better and more stable than last year,” he said.
EU’S GAS TARES ARE FULL
According to Gas Infrastucture Europe data, as of today, the occupancy rate of natural gas tanks in EU countries is at 94.24 percent.
EU countries, which consume approximately 400 billion cubic meters of natural gas annually in normal periods, have a natural gas storage capacity of approximately 113 billion cubic meters. Currently, the amount of gas in the EU’s warehouses is determined as 109.8 billion cubic meters.
“IF EU COUNTRIES GET THROUGH THIS WINTER…”
John Roberts, senior partner of the consulting company Methinks, said that gas prices will naturally trend upwards during the winter months, but how far this increase will go will largely depend on the severity of the winter.
Roberts stated that if the winter is milder, the price increases in the EU markets will be at more reasonable levels than last year, considering the amount of gas in stocks and the gas released as LNG.
Despite this, Roberts said that this winter is of critical importance: “This is a critical winter and if Europe gets through this winter, everything will be better from now on. “It’s quite difficult, but it will definitely get better,” he said.
Roberts pointed out the increasing importance of the natural gas projects carried out by Turkey and Romania in the Black Sea for Europe’s energy security, and stated that these fields are important in terms of facilitating the formation of a balanced market in the region and reducing the role of Russia, rather than the amount of gas they will provide.
IT CAUSES PRICE AND SUPPLY SECURITY PROBLEMS
Professor Brenda Shaffer from the US Naval Postgraduate School also said that the “demand destruction” experienced in Europe prevented further increases in prices.
“Many of the energy-intensive industries in Europe have either disappeared or moved to places like the United States where energy prices are cheaper,” Shaffer said. Therefore, due to the decrease in economic activities, there is also a decrease in the demand for gas and electricity. “On the other hand, LNG imports in Asia are expected to increase in the coming months, and therefore this increase in demand will also increase the prices of cargoes to be sent to Europe.”
Stating that the Russia-Ukraine War led to a renaissance in pipeline gas trade, especially for Europe, but this also brought with it some price and supply security problems, Shaffer said, “While it is so close to the world’s largest gas resource, Europe has to give up on pipeline gas and find itself “There is no point in forcing us to use less safe and higher cost LNG,” he said. (AA)