Page 6 - GLNG Week 03 2023

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Gas, panic in 2023

COMMENTARY LAST year was a disaster for Europe as Putin’s thermal units) in the first 11 months of 2022,
energy war wreaked chaos on Europe’s econo- more than seven times as high as the average
mies by sending up gas prices 20-fold, fuelling between 2016 and 2020, according to the IEA.
run-away inflation and causing a cost-of-living The sky-high prices caused a huge amount of
crisis that drove millions into poverty. Europe damage to Europe’s heavy industry that it is yet
needs to act now to avoid a repeat, and possibly to recover from. Some factories were forced to
worse, crisis this winter coming. close down and it is unsure if they will ever open
Currently with gas prices below pre-war lev- again. The EU managed to cut gas demand by
els and storage tanks at over 83% full, the out- 10% (or about 50 bcm) on average in 2022 but
look is less scary. Russian President Vladimir about a fifth those gains (10 bcm) were because
Putin lost the winter battle in the energy war Europe’s energy-intensive industry began to
but Europe is enjoying only a temporary respite, close down, made economically unviable by the
warned the International Energy Agency (IEA) record prices. This year industrial gas demand is
in a recent report. set to be around 20% (or 25 bcm) lower in 2022
Following its invasion of Ukraine, Russia cut than in 2021 because of this effect.
pipeline deliveries of natural gas to the European “The fertiliser industry accounts for more
Union by more than half. Russia’s pipeline sup- than half of these production curtailments.
plies declined from 155bn cubic metres in 2021 According to the International Fertiliser Asso-
to around 60 bcm in 2022, but the agency warns ciation, around 70% of the EU’s ammonia pro-
that Russia could send as little as 25 bcm this duction capacity was offline in August 2022 and
year. around 40% had still not restarted in October
“Our assumption in this report is that Russian 2022,” the IEA said in its report. “There have also
pipeline deliveries to the European Union will been production curtailments in the steel and
fall to zero from the beginning of January 2023. aluminium sectors, where high gas and electric-
If they were to remain at their current levels, ity prices led to a 10% drop in production in the
then Russia would supply around 25 bcm over ten first months of 2022 compared with the same
the course of 2023,” the IEA said. This is less than period in 2021. There was also less natural gas
half the 60 bcm that is likely to be delivered in the consumed in cement, glass, ceramics, food and
whole of 2022, which in turn is less than half the machinery production, although most of this
amount supplied in 2021. was because of efficiency improvements and
That shortfall has to be made up somehow. fuel switching.”
Even halving deliveries to 60 bcm drove up European policy makers want to avoid the
natural gas prices on European hubs to record same amount of pain again this year.
levels. Month-ahead prices on the Dutch TTF – Burgeoning LNG supplies saved the day in
Europe’s leading gas hub – averaged over €130 2022/23 by more than making up for the falling
per megawatt-hour ($40 per million British Russian supplies, but that gift is unlikely to repeat

P6 www. NEWSBASE .com Week 03 19•January•2023