LNG will offset Russian gas in Europe this winter, but 2023 looks complicated

Millions of Europeans have seen their gas bills rise sharply since spring 2022, a direct result of Russia’s intervention in Ukraine and the gradual shutdown of Russian gas pipelines to Europe.

While countries such as Spain and France have frozen tariffs for consumers, others such as Belgium have more or less allowed suppliers to pass the increase on to their customers. “I panicked a bit” says Sophie, owner of her poorly insulated 90 square meter house in Oostduinkerke, which is heated by a gas boiler. Before the war, he paid 120 euros a month for gas and electricity. His bill has since risen to 330 euros. It has gone so far that it now monitors its consumption, heats up to 18°C ​​and receives information on installing solar panels and double glazing…

Like Sophie, the new generation of Belgians, French or Italians in 2022 lost their energy recklessness and learned to control their radiators. In the old world, gas was plentiful and cheap. In the European market, its reference price has changed little, at around 20 euros per megawatt hour. This year it rose to 300 and fell back to 100 euros. “I have never known such a chaotic time” Graham Freedman, an analyst at Wood Mackenzie, who has followed the natural gas market for 40 years, told AFP.

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LNG will replace Russian gas

Due to crazy prices, some factories had to stop. One of the main gas consumers of the country, especially in the German chemical industry.

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However, European stocks were able to be completely filled with the last cubic meter of Russian gas this summer, and no one was cut off. “By February, it seemed impossible for Europe to go without Russian energy” recalls Simone Tagliapietra of the Bruegel think tank in Brussels. “The impossible became possible.” The Europeans were also lucky: a mild autumn delayed the ignition of the boilers.

Regardless, the drop in household and business consumption in the European Union is exceptional, roughly 25% in October compared to 2019-2021, Bruegel estimates. Half of Germans have gas boilers and their consumption is decreasing “excessive, large”, Lion Hirth, professor of energy policy at the Hertie School in Berlin, agrees. He sees a desire to do so “He doesn’t pay Putin” as well as reducing bills. Thus, within a few months, Russia lost its first gas customer – Europe. Wood Mackenzie predicts that purchases will increase from 191 billion cubic meters in 2019 to 90 billion cubic meters this year and possibly 38 billion next year.

It was then necessary to compensate with this LNG, which the EU had previously neglected because it was more expensive. With dangerous effect. “Europe started paying more for gas than Asia and countries like India and Pakistan couldn’t compete” Graham Friedman says. Climate consequence: Due to lack of LNG, these less rich countries burn more coal.

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The new main role of gas pipelines

Offloading LNG from LNG carriers requires port terminals that can regasify it and re-inject it into onshore networks. Germany had none, France and Spain a few. This gives a new role to gas pipelines in northeastern France. Although they were traditionally used to import gas from the east, they now send imported gas east via Fos-sur-Mer or Saint-Nazaire. And for the first time to Germany. “We send more gas to Switzerland” Guillaume Tuffigo of GRTgaz, which operates French gas pipelines that are then routed to Italy and Germany, tells AFP.

There will be no more Russian gas to fill supplies for next winter and beyond. The colder the winter, the more LNG you need to buy from the spring… and more “battle” Kpler gas expert Laura Page told AFP that it will intensify between Europe and Asia. And Graham Freedman agrees: “There is not enough gas in the world to replace Russian gas.” By about 2025 or 2026, new LNG projects will produce millions of additional tons.

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(via AFP)