Results of the year: anomalous scenarios of the European gas market with fuel shortages and record prices

MOSCOW, December 19 – RIA Novosti. European countries have stockpiled gas and will likely get through this winter calmly, but experts interviewed by RIA Novosti paint them “completely abnormal scenarios” for the upcoming heating season, with fuel shortages and new price records.

“For example, if no political decision is taken to restart gas supply from Russia at least through the remaining Nord Stream 2 line or the Yamal-Europe gas pipeline, then next year, especially the winter of 2023-2024, will be a challenge for Europe. ‘ says Skoltech analyst Sergey Kapitonov.

Currency gas prices in Europe are now down after sharp turns during the year, but average annual figures are extremely high. Analysts are confident that the cold and windless weather could scatter them back to $3,000 by spring, and up to $4,000 per thousand cubic meters at peak demand.

As early as 2021, the price of “blue fuel” began to rise noticeably on the European market, and in the spring of 2022 gas contracts reached a record level of $ 3,892 per thousand, amid fears of bans on imports of Russian energy sources. cubic meters. Prices are now down to $1,300-1,500, but still five times the average of the previous five years.

In the entire history of operation of gas distribution centers in Europe since 1996, such persistently high prices have not been seen. In response to the record growth, the European Commission has proposed to impose a ceiling on foreign exchange prices for gas, but has yet to be decided by EU countries.

In the near future, experts do not exclude an increase or decrease in prices. For example, BCS World of Investments senior analyst Ronald Smith said gas prices could drop to $700 per thousand cubic meters by the end of March 2023 if Europe experiences an unusually hot and windy winter.

According to him, prices will stay in the range of 1400-1700 dollars in a normal winter period. According to Smith, cold, windless weather can push prices to $3,000 or more, especially toward the end of the heating season, when storage begins to wane.

Dmitry Skryabin, portfolio manager of Alfa Capital Management Company, is confident that under no circumstances will prices fall below $1,000 per thousand cubic meters for a long time. And, according to him, updating the historical maximum of $3,892 will only be possible with increased geopolitical risks, such as stopping gas transit through Ukraine.

CSR expert Sergei Kolobanov warns that the foreign exchange price may rise to record levels above $4,000 during peak demand periods. He explained that the cost of gas in the market will be affected by the competition for LNG supply between Europe and Asia, where there is uncertainty in consumption estimates at the moment due to the novel coronavirus outbreaks. He estimates the bottom to be $400-$500.

Last year, many European countries partially or completely lost the largest gas suppliers represented by Gazprom: if by the end of 2022 the volume of supply to the region will be about 80 billion cubic meters, then it may be in 2023. Skoltech’s Kapitonov says it has been reduced to 25-30 billion cubic meters.

In the spring, Gazprom announced that supplies to Bulgargaz in Bulgaria, PGNiG in Poland, Gasum in Finland, GasTerra in the Netherlands, as well as Shell Energy Europe in Germany and Orsted in Denmark will be reduced or stopped altogether. Comply with the presidential decree of the Russian Federation on payment in rubles or other technical reasons.

Then, at the beginning of the summer, deliveries along the main route Nord Stream were significantly reduced, since the German Siemens could not return the necessary unit to Russia after repair due to Canadian sanctions. Full operation of gas pipelines became impossible due to difficulties in maintenance, and in the autumn supply along the route completely stopped.

Pumping along the stabilizing Belarusian route “Yamal-Europe” was also stopped due to Russia’s counter-sanctions against the operator of the Polish division, and significantly reduced along the Ukrainian route, since Kiev blocked part of the crossing. As a result, Russian pipeline gas is now supplied to Europe via one of the two entry points to Ukraine’s gas transport system and Turkey, where it comes via Turkish Stream and Blue Stream.

At the same time, exports to China are increasing, according to Power of Siberia. “Gazprom” emphasizes that deliveries regularly go beyond daily contractual obligations. These volumes will grow as new routes are built.

So far, experts do not see the prerequisites for the development of a dramatic situation in the European gas market: countries took measures to reduce demand and pumped enough fuel into underground storage facilities. However, Kapitonov believes that next year, and especially the winter of 2023-2024, will be an “existential challenge” for Europe.

“Right now there is very little LNG in the world, almost all of it is being swept up by Europe and Asia, and now the latter is starting to increase purchases in anticipation of winter. So next year it will be extremely difficult for Europe to make it happen. Given the lack of gas from the East, UGS “It’s an ambitious task to pump 90% of their capacity by October-November.”

Kapitonov believes that “completely abnormal scenarios” are possible in the European gas market with the start of the new heating season.

The European Union has developed the RePowerEU plan, which outlines measures to phase out fuel imports from Russia, improve energy supply security and support the green transition, and propose further measures to reduce gas and electricity demand.

However, no one can predict with certainty whether this plan will work. The market is still tense, next year brings new challenges and it is not known how Europeans will cope with the energy crisis plaguing the region.