Europe’s gas supply is still not secure in the coming year.
(Photo: Moment/Getty Images)
Brussels The gas price is falling – and not just the daily spot price, which is subject to fluctuations. Delivery contracts for the coming year are also becoming cheaper. Anyone who orders gas today that is supposed to flow in a year pays less than 140 euros per megawatt hour – 50 percent less than in August.
The unusually warm autumn is one reason for this, another is the economic downturn in China. With his zero-Covid policy, head of state Xi Jinping has choked off growth, and the People’s Republic’s gas requirements have fallen significantly. This means: less price pressure on the market.
In inflation-plagued Europe, the fall in prices is currently one of the few pieces of good news. However, it would be too early to give the all-clear. The European energy crisis is far from over, experts warn. The EU is also continuing to prepare for difficult times.
A collection of facts, graphs and tables on the gas market is currently circulating in the Commission. It is available to the Handelsblatt. The outlook for the coming winter is particularly interesting. The EU experts expect that Europe will need a total of 140 to 180 billion cubic meters of gas in the 2023/2024 heating season.
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Whether it is possible to obtain this amount via pipelines and liquid gas carriers depends largely on three factors.
1. China’s economic development
LNG imports “benefit from the seasonal ebb and low Chinese demand,” the commission notes – and asks: “How sustainable are these forces?” As soon as the Chinese economy picks up again, the country’s gas needs will also increase.
2. Deliveries from Russia
The Russian energy company Gazprom has drastically reduced exports to the EU, but has not stopped them completely. Gas is still flowing to Europe via the Turkstream pipeline and the Ukrainian pipeline network. According to the EU Commission, Russian gas supplies are “still crucial” and could contribute 14.4 billion cubic meters to the supply – if the Kremlin cooperates.
3. The situation in Great Britain
The UK received substantial amounts of Russian gas via pipelines from the EU earlier in the winter. That has turned around. Liquefied natural gas is now being landed via British LNG terminals, which is then resold to the EU. If this is also maintained in the beginning of the heating season, it will help the EU.
It is therefore not possible to predict exactly how large the offer will be. The demand is also unclear. “Currently, the signs are not pointing to rationing,” says energy economist Lion Hirth. “But we don’t know how cold the winter will be and how much households will save. The situation can still get very difficult.”
EU countries benefit from LPG deliveries to the UK.
(Photo: Bloomberg)
The winter of 2023/2024 is currently causing the greatest concern. Because in the coming year, Russian gas deliveries will be able to contribute significantly less to the filling of the storage facilities. The EU Commission is therefore trying to avoid everything that could increase consumption – in particular a gas price cap.
More Handelsblatt articles on gas supply in Europe:
At the meeting of EU energy ministers on Tuesday, the Commission presented a discussion paper that is likely to drive a wedge between supporters of the “Iberian” gas price cap. The purpose of this cap would be to subsidize gas for the production of electricity in order to lower the electricity price.
In the paper, which is available to the Handelsblatt, the Commission names the country with the greatest benefit from the measure (France), the countries with the highest costs (Germany, Italy, the Netherlands) and the countries that benefit little from all of this ( parts of Central and Eastern Europe). The different electricity markets are the reason for the different effects. France imports gas-generated electricity, in Central and Eastern Europe gas-fired power plants only set prices for a few periods.
More: Is Europe on the way to becoming a deindustrialized continent as a result of the energy crisis?