HomeMediaLatest NewsHow the EU overcame one winter with a collapse in Russian gas supplies and is preparing for another

How the EU overcame one winter with a collapse in Russian gas supplies and is preparing for another

06 April 2023

Belogoryev Alexey M. Research and Development Director, Director of the Center for Energy strategic analysis and forecasting

Alexey Belogoryev, Research and Development Director at the Institute for Energy and Finance, commented to Forbes on the results of the 2022-23 heating season and prospects for the heating season 2023-24 in the EU.

The European gas "miracle" of autumn 2022 - spring 2023, in addition to exceptionally favorable weather conditions, is primarily a consequence of the market model of wholesale pricing at European gas hubs, Aleksey Belogoryev says. Thanks to it, the classic law of supply and demand worked: a quick and unexpected reduction in imports from Russia led to a sharp increase in stock prices, which, in turn, discouraged demand and attracted additional supplies to the European market, primarily LNG from markets where it was cheaper. As a result, a new point of market equilibrium was found in the shortest possible time, Belogoryev explained to Forbes.

The end of the heating season in the EU with UGS stocks at around 55.7% means that 30 billion cubic meters of gas less compared to 2022 will need to be pumped into storage from April to October, the expert notes. Taking into account the gas withdrawal, which continues in the summer period, the total amount of injection is unlikely to exceed 48 billion cubic meters, that is the lowest figure in modern history. Such a low need for injection actually guarantees that by November 1, 2023, at least 90-95% of the required gas volume will be accumulated in EU UGSFs.

The initiative to restrict access of Russian LNG to EU regasification terminals is unlikely to lead to a sharp reduction in its [supplies] in the coming months, especially to France, Belgium and the Netherlands, Belogoryev said. This, according to him, is due to the contractual structure of the export distribution of the Yamal LNG plant, in which the European companies TotalEnergies, Naturgy Energy Group and the former Gazprom Marketing & Trading (now SEFE) play a leading role.

“But during 2023, we can expect a gradual displacement of Russian LNG by imports from other countries, especially from the United States after the restart of the Freeport LNG plant,” the analyst says. “Reducing imports from Spain can play a key role in this.” However, overall Russian LNG exports in 2023 and 2024 are unlikely to be affected much, as Russia is able to redirect the surplus in volumes to other markets.

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