Europe faces gas insecurity

Europe is likely to survive cuts in Russian natural gas supplies this winter as the war in Ukraine continues, but the coming heating season will underscore the continent's ability to meet energy needs, experts said at the Columbia Global Energy Summit in New York.

The flow of Russian pipelines, which met about a third of the total gas demand in the European Union in 2021, is likely to decline by about 80 billion cubic meters in 2022, or about 20% of total demand, according to Anna-Sophie Korbeau, a global researcher at Columbia University. . Center for Global Energy Policy or CGEP. Increased US LNG supplies and Norwegian gas production will help offset the shortfall, but Europe will have to cut gas demand by about 10% through efficiency and savings initiatives, said Korbo, a former head of gas analysis at BP.

“We will be able to handle this next winter if the winter is not too cold, if we continue to attract LNG,” Korbo said at an October 12 event.

The mild winter of 2021-2022 in Asia and China's anti-COVID-19 policies that have stifled economic activity and energy demand have strengthened Europe's ability to divert LNG cargoes from the Asian market, Corbo said. China is unlikely to reverse its COVID-19 policy anytime soon as the government seeks to prevent transmission of the virus during major political events in October and March 2023, said CGEP Senior Scientist Erica Downes.



Meeting demand will become even more of a challenge in 2023
However, Corbeau is concerned about the next two winter seasons due to the pace of launching LNG projects, the main source of additional gas supplies in Europe. Qatar's North Field East project and some US export terminals will not be operational until 2025, she said. Consequently, Europe may have to cut demand more than currently expected as it also faces sharp declines in nuclear and hydroelectric power generation, Corbo said.

Former Centrica CEO Ian Conn said Europe is on track to offset Russian gas deliveries in 2021, which totaled 155 billion cubic meters, ahead of the coming winter. Europe is likely to follow the same pattern in the winter of 2023-24, but the task will be "a bit more difficult" due to the need to replenish some 70 billion cubic meters of gas storage, according to Conn, who is currently a senior adviser to Blackstone and The Boston. . Consulting group.

"Why is it important?" Conn said. “If Europe can demonstrate that it can do without Russian gas, it makes no sense that natural gas prices are at $50 per MMBtu. And at that moment we will see how the market stabilizes again. so maybe it still won't be back to historic levels."

Europe can do without Russian gas in two or three years, said Eirik Verness, senior vice president and chief economist at Equinor. But in the meantime, cash-strapped Europeans will partly make do with energy rationing amid the cost-of-living crisis, he said. "Uncontrolled de-industrialization" could also occur in some European industrial centers, he said, as high gas prices force the closure of fertilizer, steel and aluminum plants, paving the way for a recession.