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Gaz was promised winter records

16 August 2022

Salikhov Marcel R. President, Principal Director on Economic Studies, Head of the Economic Department

Marcel Salikhov, President of the Institute for Energy and Finance, commented to the Kommersant FM radio station on the realistic nature of Gazprom's forecast of gas prices over $4,000 per 1,000 cubic meters in winter in Europe.

Because of the abnormal heat in Europe, problems began with the delivery of coal along the rivers. In addition, gas supplies from Norway have decreased due to scheduled repairs at the fields. Against this background, gas futures prices continue to grow, and hypothetically, quotes can overcome the bar of $4,000, Marcel Salikhov, president of the Institute for Energy and Finance, admits.

However, according to him, this would be the exception rather than the rule:

“During the peaks, on some separate days, it is possible that prices can reach $4,000 and exceed them, but we are not talking about some kind of long-term forecast. This is an assumption, such prices have never been. No one knows what may be happening in the market and how supply and demand will react.

Let's say the same Germany replenishes its storages ahead of schedule. In Europe as a whole, the occupancy of UGS facilities is 75%. The target level by November 1 is at least 80%. Most likely, their goal will be 90%, and it takes about 7 billion cubic meters to reach 80%. It's not that much. Supplies are at low levels. If we calculate everything in total, then this is about 110 million cubic meters per day, which is about four times less than last year.

Naturally, this creates a shortage in the European market. It seems to me that the situation is already quite close to the fact that next year Russian gas supplies will stop and transit to Southern Europe will begin through the Turkish Stream. The situation is difficult, you need to make decisions.

Now the main alternative is LNG, which is being repurchased, and there are many more opportunities on the horizon of several years. Plus, there is a chance to expand their own production. In the Netherlands, in principle, it is possible to increase production. There are talks about allowing the extraction of shale oil in the same Germany. At such prices, any gas production project will be profitable.”

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