Reached the peak: gas in Europe became record-expensive

Marcel Salikhov, President of the Institute for Energy and Finance commented to the Izvestia newspaper on the situation at the European gas market.

“At present, the European gas market is liberalized, the price of gas is determined freely at hubs, the largest of which is TTF,” Marcel Salikhov, President of the Institute for Energy and Finance said. - Therefore, the main reasons are related to supply and demand factors. According to operational data from gas transmission operators, in May 2021, demand was 17% higher than last year. For the first five months of 2021 - 17.6% more than the demand for 2020. Few expected such strong dynamics of demand, including European importers.

According to Salikhov, the proposal, in principle, reacts to the demand’s jumps with a certain lag due to the need to increase production, transport shoulder and other factors. Therefore, the current balance is usually covered from UGS facilities. But the jump in demand turned out to be too large, which led to a shortage in the market and an increase in prices.

Interestingly, other pipeline gas suppliers to Europe do not have any special opportunities to increase shipments, or they have already done so.

“Norway does not currently have free capacities to increase production,” Salikhov said. - The Oil Directorate of Norway plans that in the next five years, gas production in the country will remain at the level of 110-115 billion m3. This is partly due to Norway's deliberate policy to limit investment in the new fields development. As for Algeria, it has almost doubled gas supplies to Europe this year compared to last year. But these are relatively small volumes (20-22 billion cubic meters per year) and only two national markets - Italy and Spain.