Can the EU, which has moved away from Russian natural gas, have its tanks full before winter?

Following the war between Russia and Ukraine, the European Union (EU) is trying to reduce its dependence on Russia, the largest supplier of natural gas. In this context, EU countries are trying to fill their natural gas tanks before winter arrives.

However, experts say a mild winter is crucial for the EU, which suffered from high gas prices last year.

European gas markets have been experiencing continued volatility in recent months due to extreme temperatures, gas plant maintenance and ongoing strikes at major liquefied natural gas (LNG) plants in Australia.

THE ENERGY CRISIS DEEPENS

The energy crisis, which grew due to the imbalance between supply and demand that emerged with the Covid-19 epidemic and supply concerns caused by the war between Russia and Ukraine, deepened further when Russia largely stopped exports of gas to Europe.

Gas prices, which had risen since the start of the energy crisis, continued to rise rapidly after the war, and August 2022 was recorded as the date when the price of gas per megawatt-hour broke a record, surpassing the 300 euros.

Gas prices decreased thanks to the absence of major cuts during the winter period, low temperatures and EU measures to reduce gas demand. Prices, which ended August at 35 euros per megawatt-hour ($396 per 1,000 cubic meters), fell to 31 euros ($350 per 1,000 cubic meters) in September.

However, in recent days, gas prices have started to rise again due to growing energy demand in Europe and concerns that Russia will reduce its gas exports.

Yesterday, prices for October TTF futures contracts closed at 37.28 euros per megawatt-hour ($422 per 1,000 cubic meters). Prices, which during the day rose to 39.6 euros, decreased by 9.8 percent compared to yesterday’s close and were trading at 35.7 euros per megawatt-hour at 09:36 Turkish time.

EU COMES TO BUY LNG FROM RUSSIA

EU countries, which embargo Russian oil and coal and exclude natural gas, have pledged to end all supplies of Russian fossil fuels by 2027. Europe tried to make up for the gap created by Russian gas by increasing imports of LNG by 60 percent.

Last year, EU countries made 44 percent of their total LNG imports from the US, 17 percent from Russia and 13 percent from Qatar. Kadri Simson, member of the European Commission responsible for Energy, expressed the discomfort he feels about the situation and asked all companies and member states to do their part.

Speaking at the Energy Security Conference in Warsaw, Poland, Simson noted that the supply concerns experienced before winter last year were non-existent this year and said the situation in Europe is currently better than anyone. could have foreseen.

Recalling record gas prices in Europe a year ago, Simson said: “Beyond market volatility, we must also take into account hot summers, cold winters, unplanned nuclear blackouts or limited supplies of hydropower. . All this could lead to more gas being used for electricity generation in Europe. “But for now, the outlook is much better and more stable than last year,” he said.

EU GAS TARES ARE FULL

According to data from Gas Infrastructure Europe, today the occupancy rate of natural gas deposits in EU countries is 94.24 percent.

EU countries, which consume approximately 400 billion cubic meters of natural gas per year in normal periods, have a natural gas storage capacity of approximately 113 billion cubic meters. Currently, the amount of gas in EU storage is estimated at 109.8 billion cubic meters.

“IF THE EU COUNTRIES GET OVER THIS WINTER…”

John Roberts, senior partner at consultancy Methinks, said gas prices will naturally tend to rise during the winter months, but how far this rise goes will depend largely on the severity of the winter.

Roberts said that if the winter is milder, price increases in EU markets will be more reasonable than last year, considering the amount of gas in stocks and the gas released as LNG.

Despite this, Roberts said this winter is critically important: “This is a critical winter and if Europe gets through it, everything will be better from here. “It’s quite difficult, but it will definitely get better,” she said.

Roberts highlighted the growing importance of natural gas projects carried out by Turkey and Romania in the Black Sea for Europe’s energy security, stating that these fields are important in terms of facilitating the formation of a balanced market in the region and reduce Russia’s role, rather than the amount of gas they will supply.

CAUSES PRICE AND SUPPLY SECURITY PROBLEMS

Professor Brenda Shaffer of the US Naval Postgraduate School also said the “demand destruction” experienced in Europe prevented further price increases.

“Many of the energy-intensive industries in Europe have disappeared or moved to places like the United States, where energy prices are cheaper,” Shaffer said. Therefore, due to the decrease in economic activities, there is also a decrease in the demand for gas and electricity. “On the other hand, LNG imports into Asia are expected to increase in the coming months, so this increase in demand will also increase the prices of cargoes to be sent to Europe.”

Stating that the war between Russia and Ukraine led to a revival in pipeline gas trade, especially for Europe, but this also brought with it some price and supply security issues, Shaffer said: “Although it is so close to the source largest gas producer in the world, Europe “It makes no sense to force us to use less safe and more expensive LNG,” he said. (BRITISH AUTOMOBILE CLUB)