2023-07-19 06:28:12
While storage tanks are filling up at a good pace and should be full by the end of the summer, could Europe run out of gas this winter? This is the question posed by a study published by the Jacques-Delors Institute. “The passage of winter 2022-2023 was largely ensured by a conjunction of economic factors which may not recur”underlines Camille Dehard, head of the energy center of the Institute, for whom “Security of supply remains precarious”.
Europe has thus reduced its gas consumption by 18% between August 2022 and March 2023 compared to the average of the last five years (i.e. the equivalent of 50 billion cubic meters of gas). This is more than the 15% drop initially set, thanks in particular to milder temperatures than normal for the season, the adoption of sobriety measures and the very sharp drop in demand from manufacturers, who preferred to reduce their production, given the very high gas prices.
Sobriety efforts are not the same everywhere
Since then, gas prices have fallen sharply. They trade around €30 per megawatt/hour on the spot market, against €160/MWh a year ago, and around €50/MWh for delivery next year. This decline could revive consumption. Because even if the EU has renewed until March 31, 2024 its objective of reducing gas demand by 15%, it is not certain that all the countries will participate to the same extent, given the numerous derogations and exemptions.
“Undifferentiated calls for demand reduction risk being socially unfair because not all actors have the same leeway to reduce their energy consumption”, emphasizes the Jacques-Delors Institute. Already last year, seven countries (Malta, Ireland, Slovakia, Spain, Poland, Slovenia, Belgium) failed to reduce their gas needs by 15%. And only 14 out of 27 states have adopted binding measures to reduce their energy consumption, the report notes.
Dependence on American LNG
Since the start of the war in Ukraine, Europe has nevertheless managed to diversify its supplies very quickly. Russian gas only represented around 15% of its consumption in the first quarter of 2023, compared to more than 40% a year earlier.
It has been partly replaced by American gas, which is essentially shale gas. In 2022, the EU imported 56 billion cubic meters of it (+ 153% over one year), i.e. a third of what previously came from Russia. Called “freedom gas” by the Biden administration, it now covers 20% of European consumption.
“The Old Continent has gone from a Russian dependency to an American dependency”, says Alexandre Joly, head of the energy division at Carbone 4, pointing to the environmental bill. According to him, American shale gas, which must be extracted by hydraulic fracturing, emits 20% to 45% more greenhouse gases than Russian gas.
The risk of the American presidential
The volumes of American gas landing in European ports continue to increase, with the commissioning of new LNG terminals. But nothing says that the tap will not dry up. In the United States, some manufacturers believe that these exports contribute to fueling the rise in the price of gas on the domestic market.
They could be heard by the Republicans, if they win the presidential election in November 2024. “A systemic risk” who would become “a great shock” for Europe, according to Patrick Pouyanné, the CEO of TotalEnergies, questioned on the subject at the Economic Meetings of Aix-en-Provence, July 8. In the United States, the president has a discretionary right to ban gas exports.
Uncertainties over the volumes of Russian gas still arriving
Now, 40% of European gas imports are in the form of LNG, nearly half of which is purchased on the spot market, which is very volatile by nature. “Its price is on average two to three times higher than that arriving by gas pipeline and Europe has no guarantee on the volumes available”, Judge Camille Dehard, recalling that last year the Europeans were able to take advantage of the 20% drop in Chinese imports of LNG, or 22 billion cubic meters. But a restart of the economy in China could be a game-changer.
Finally, there is the future of Russian gas imports, which have not ceased despite the war in Ukraine. They represent 20% of the LNG arriving in European ports, which is more than before the Ukrainian conflict. Three Russian gas pipelines, two of which pass through Ukraine, also continue to supply countries in the east of the continent, such as Hungary, but now ” sparingly “, emphasizes the Jacques-Delors Institute. A total stoppage of Russian deliveries would represent around 40 billion cubic meters less in 2023 compared to 2022, i.e. the equivalent of French gas consumption.
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