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Analysis: Natural gas market situation stabilises
Europe has successfully weathered the energy storm of 2022-2023 and, in the absence of unforeseeable events, we will see a stabilisation of the situation on the natural gas market and, implicitly, of the price, but future energy crises determine the need for long-term energy strategies and the existence of plans of measures for energy emergencies, says the president of the Intelligent Energy Association, Dumitru Chisalita, in an analysis.
He considers that the surplus of gas in the stores, the new GNL infrastructures which are going to be finalized in the next months, as well as the maintenance of low consumption in China will bring drops in gas price down to 20 euro/MWH in 2024, with a possible increase of gas price in 2025, as a consequence of elimination of the gas from Russia through Ukraine.
According to the quoted source, the security of supply with natural gas has improved significantly in 2023, and the EU is about to achieve the objective of REPowerEU of independence from fossil fuel from Russia before 2027.
In 2022, total imports of Russian gas (GNL and natural gas through pipelines) dropped at 80 billion cubic metres, namely 24% of the EU imports, in comparison to annual imports before the crisis, of 155 billion cubic metres, namely 45%.Even if GNL imports from Russia increased since 2021, they represent a very small share of the total of gas imports.
The total volume of imports continued to drop in 2023, estimated at approximately 40 -45 billion cubic metres. In June 2023, only 8% of the gas imports were made through Russian pipelines, as compared to over 50% before the aggression war. Due to important efforts of diversification and reduction of demand, EU was able to compensate totally the lacking volumes from Russia. The new storage policy did ensure not only energy security for the winter of 2022 – 2023 but a more comfortable situation for the next winter.
In March 2022, the EU heads of state issued the Versailles Declaration, focusing on the pillars of EU answer to the energy crisis. These pillars were later incorporated in the plan REPowerEU of the EU Commission (May 2022), the central political framework for EU energy strategy. The plan proposes to reduce the dependence on Russian fossil fuel and guarantee sustainability and long –term stability for the EU energy system.
As a result of the REPowerEU plan, the EU diversified significantly the energy supply and in April 2022 the Commission, mandated by the European Council, created a EU energy platform to pool the EU gas demands and coordinate voluntary joint procurement with a view to signing favourable contracts with international non-Russia suppliers.
The EU energy platform was accessible, as well to Georgia, the Republic of Moldova, Ukraine, the Western Balkan countries, while Ukraine, the Republic of Moldova and Serbia subscribing to the platform.
‘The Commission supported the member states in the process of approaching the blockage in the gas infrastructure identified in the REPower EU plan. The projects of common interest finalized over the last months have put an end to the dependence of all member states to a single energy supplier, and the EU registered remarkable progress as regards the diversification of its supply with energy and optimization of the existing infrastructure for natural gas through pipelines, for example the Baltic Pipeline, the interconnection pipeline Poland-Slovakia and Greece-Bulgaria, allowing reverse flow between France and Germany and LNG terminals e.g. in Germany, Greece, Italy and Finland’ says the author of the analysis.
Moreover, the Commission made many efforts to consolidate the relations with international partners and diversify gas and GNL imports to more reliable suppliers outside of Russia.
The EU extended its natural gas and GNL imports from Norway and the US to compensate the reductions of imports from Russia. Imports of GNL from the US increased by 49.3 billion mc, over two times in 2022 (2021: 18.9 billion mc).
Pipeline natural gas imports from Norway increased from 79.26 billion mc in 2021 to 86.69 billion mc in 2022, increasing Norway’s quota in the total of EU imports from 30% to 40%.
The Commission has regular dialogue with Nigeria, the largest GNL producer in Africa. In July 2023, new memorandums were signed regarding cooperation in the domain of energy transition with Uruguay and Argentina. In July 2022, the EU and Azerbaijan adopted a new memorandum regarding a strategic partnership in the domain of energy and the EU increased its supply with natural gas from this country by 40%. Both parties agreed to double the gas quantity delivered to the EU by 2027 through the Southern gas corridor and to intensify the cooperation as regards clean energy, energy efficiency, electricity transport and methane emissions.
In the Mediterranean region, the Commission continued to collaborate with Egypt and Israel for natural gas which contributed to the increase of supply with GNL from Egypt to the EU from 1.1 billion mc in 2021 to 4.2 billion mc in 2022.
The EU continued its dialogue with Algeria with view to developing its strategic partnership in the domain of energy. Total energy imports from Algeria registered a slight decrease in 2022, getting to 40.35 billion mc (2021: 44.1 billion mc).
Pipeline imports in Spain dropped while imports in Italy increased, according to the analysis.