Europe fills up on gas but race to replace Russia far from over
Even as Europe can fill up its gas storage, Europe is facing a dangerous winter and governments will need to keep rationing schemes on hand as they keep pace with rapid change There is a race to secure more liquefied natural gas (LNG). reliance on Russian fuel.
Meanwhile, for European households, there has been little respite from skyrocketing fuel prices, which have strained the budget, eroded disposable income and dented the economic outlook.
The European Union aims to end dependence on Russian fossil fuels by 2027. But Moscow has cut gas flows for its German contracts to Bulgaria, Poland, Finland, Danish supplier Orstedt, Dutch firms Gasterra and Shell, after all rejected Kremlin demands. Switch to payment in rubles.
The 27-member EU, which has traditionally relied on Russia for 40% of its gas needs, aims to have its gas storage 80% full by November, now almost half full, to make it through the winter. To see, when stored gas usually yields about one. quarter of demand. Analysts say it is on track.
But that still leaves a huge gap to be filled by other sources like LNG, and it will be even bigger if Russia cuts off flows to more European buyers, though Moscow says it can meet its obligations. and there is no need to stop supply to other customers. ,
Rising demand
"Completely stopping Russian flows will undoubtedly be Europe's worst-case scenario for this winter as the continent is unlikely to be able to supply enough from other producers," said European natural gas collaborator Leon Izbicki. On energy aspects.
Gas demand was rising in the post-pandemic recovery, sparking an energy crisis in Europe, before Russia invaded Ukraine in February. The market for LNG, which is dominated by long-term contracts, was already tight as a drum.
The European Union has lifted LNG purchases, with imports about 58% in the first five months of 2022 compared to 2021 levels, Refinitiv data showed, as more capacity came on stream in the United States and higher prices in Europe. Attracted cargo.
LNG disruption
The United States, a major LNG producer, has pledged to help Europe with more shipments.
But Europe has limited capacity to obtain LNG and adding to the uncertainty, Freeport LNG, operator of one of America's largest export plants, said on Tuesday that it would take at least a resumption of partial operations after a blast last week. It will take at least 90 days.
"If Europe goes into winter by relying only on LNG supplies, things could get sticky," said Evangeline Cookson, research analyst and meteorologist at commodities broker Marex.
Unlike piped gas, which can be expanded rapidly, shipping of LNG can take weeks and may be hampered by weather.
The US National Oceanic Atmospheric Administration said there was a 65% chance of an above-normal Atlantic hurricane season, including six to 10 hurricanes last month.
Izbeki of Energy Aspects said the gas in storage could see Europe without Russian supplies until 2022, but that it would struggle when winter arrives at the end of 2023, so governments can't postpone their rationing plans just yet. .
Germany, which has historically been dependent on Russia for nearly half of its gas needs, has already begun planning an auction system to help ration gas to energy-intensive industries when supplies are cut.
France has implemented measures to limit the supply of gas to large consumers in the event of any shortage.
Poland, already cut off from Russian gas, has boosted LNG imports, opening a gas link to Lithuania in May and aiming to open a new pipeline to Norway this year. But it still has plans to curtail gas for heavy industry in a crisis so that it can keep supplies of homes and public services.
Still, a heavy economic price will have to be paid for the ration. Berenberg's chief economist Holger Schmeeding estimated that the EU's economic output would be 2% lower by the end of 2022 if Russian supplies were stopped now.
Gas accounts for more than 20% of the EU's energy use, heating homes, generating electricity and manufacturing important products such as fertiliser. Meanwhile, rising fuel costs are already making an impact.
"Even with no restrictions, higher gas prices are taking a toll on consumers, leaving them with less money to spend on other goods and services," Schmiding said.