Page 4 - GLNG Week 02 2023

GLNG COMMENTARY GLNG

Putin has lost this winter

gas battle, but another

energy crisis is ahead

COMMENTARY Russian President Vladimir Putin needed a very 4, representing its lowest level since mid-January
cold winter. He didn’t get it. As a result, Europe’s last year. The UK NBP contract has seen a sim-
gas storage tanks are at record-high levels and ilar descent, bne IntelliNews’ sister publication
the price of gas has crashed on the Dutch TTF Newsbase reports.
exchange to below pre-war levels. Putin has lost Prices have rallied since then on the back of a
the winter battle in the energy war. cold snap, but with Europe continuing to enjoy
Yet it is too early to declare victory in the ample LNG supply and record volumes of gas in
energy war with the Kremlin. Europe faces a storage for the time of year – 83% of capacity as
second round in the energy crisis that could of January 7 – the worst seems to have passed.
start this summer, when the underground gas The warm winter must be a big disappoint-
storage (UGS) facilities must be refilled ahead of ment for Putin. The cost-of-living crisis has
next winter. already caused a series of mass protests across
Europe will last into the run-up to the next Europe and on January 11 protesters clashed
heating season, but the tanks are simply not big with police in the Germany town of Lützerath,
enough to ensure it can get through the next win- protesting against the revival of coal as a fuel.
ter without blackouts and rationing, and it can’t A cold winter would have turned the screw on
be sure it can source enough gas this year to refill costs and led to more demonstrations, putting
the tanks and ensure continuing imports in the pressure on Western governments to seek an
cold months. Russian exports to Europe this year ending to the conflict.
are going to be half what they were last year, and The most powerful card in Putin’s hand is the
in 2022 they were already half of what they were ability to plunge Western Europe into darkness
the year before, the last “normal” year. as the high prices and lack of gas have already led
Unpredictable weather, growing demand for to numerous energy-intensive industries closing
gas in Asia and the danger that the Kremlin cuts down across Europe, which leads to the indus-
deliveries to Europe completely this year has led trial lobby also pushing for peace, which is also
the International Energy Agency (IEA) and ana- already apparent in Germany. And then there
lysts interviewed by bne IntelliNews all to warn is the cost: European governments have also
that this year’s energy crisis could be worse than already been forced to spend €750bn on energy
last year’s. subsidies and support.
The energy card was always going to be the
Gas as a weapon, weather as an ally most effective during the first year it was played;
This year it’s becoming increasingly clear that but the EU response has been rapid and dra-
Europe has avoided the worst-case scenarios matic. Paying through the nose, the member
of rolling blackouts and emergency energy states scrambled to secure alternative energy
rationing. A combination of an exceptionally supplies, buying up LNG, but also restarting
warm winter and record imports of LNG have coal-fired power plants or delaying mothballing
been a body blow to Putin’s attempt to use gas as nuclear power plants (NPPs), as well as running
a cudgel to beat concessions out of the West in public information campaigns extolling citizens
his showdown over the fate of Ukraine. Europe to turn down the thermostat to save energy.
is now almost certain to get through this winter And it worked, helped by the warm winter,
with adequate supplies of energy. which has defeated Putin’s best efforts to make
European gas prices slumped to their lowest the crisis worse. UGS facilities in Europe were
level in the first week of the year since before 83% full containing 90bn cubic metres of gas,
Russia launched its invasion of Ukraine. The as of January 1, which is 16.2pp higher than the
front-month TTF contract closed at €65 per 5-year average. Amazingly Germany, which
MWh ($739 per 1,000 cubic metres) on January is most exposed to gas shortages and home to

P4 www. NEWSBASE .com Week 02 12•January•2023