Page 26 - Russia OUTLOOK 2023
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supply capacity.
The other issue for the EU is competition for LNG. This year, weak Chinese LNG
demand has been a blessing for Europe. LNG imports from the world’s largest
buyer were down 22% y/y over the first 10 months of the year. This would have
been due to the higher price environment as well as the demand impact from
Covid-related lockdowns throughout the year. However, if we see a recovery in
Chinese demand next year, Europe will have to compete more aggressively for
supply.
Cold winter
How the energy crisis in Europe plays out will depend heavily on how cold the
winter is.
December in Northern Europe will be colder than the climatic norm, Bloomberg
reported in December, citing weather forecasts. If the Arctic anticyclone turns
out to be deep and blocking, there will be almost no wind. Consequently the
generation of electricity from wind farms will be under threat and the need for
gas generation will increase.
This means a severe test for the EU energy system, given that gas supplies
from Russia are now carried only along one line through Ukraine and along the
TurkStream – amounting to no more than 70 bcm. This is noticeably less than
the total daily consumption of Germany alone.
The fact is that traders have good reasons not to lift gas from storage facilities,
Kommersant writes. First, many companies filled their storage facilities at peak
prices, when gas cost under $3,000 per thousand cubic metres, and they
would like to sell it no cheaper. Secondly, companies are afraid of difficulties
with filling UGS facilities next summer. LNG, oriented to Europe, is still
sufficient, and it is still more expensive than in Asia.
Gazprom closely monitors the dynamics of stocks in European UGSFs – as of
November 29, 3.3% of the stockpiled volume was withdrawn from them. “The
load on UGS facilities in Europe in the current autumn-winter period will be
higher than in previous years, due to the changed logistics and sources of gas
supply to the European market,” the Russian concern notes.
A cold winter in Europe is good for Gazprom: the more gas Europe takes away
now, the more expensive it will have to be replaced in 2023. Bloomberg
forecasts prices in the $1,000-$2,000 per mcm range for another year,
especially with price-driven European subsidies and limited LNG supply. For 11
months, Gazprom has reduced exports to non-CIS countries by 44.5%, but gas
prices in Europe are now four times higher than last year.
26 Russia OUTLOOK 2022 www.intellinews.com