The supply of natural gas to Europe is an absolute necessity given the energy strategies adopted and the industrial and residential heating needs. The counterpart of a policy imposed in particular by European institutions imposing intermittent wind and solar renewables is to have, when there is no wind or sun, power plants capable of supplying the networks in a few minutes, gas power plants… To the point that for the European Commission, natural gas has even obtained the qualification of transition energy if it makes it possible to replace coal-fired power plants. Certainly, coal emits almost twice as much CO2 as natural gas, but the latter nonetheless remains a fossil hydrocarbon…
Today, Europe’s natural gas reserves are 95% full, which allows us to approach the cold season without fear. We must not forget that the main reason why the European Union got through the energy crisis of winter 2022-2023 without too much difficulty is called luck. That of having a particularly mild cold season. At the time, gas reserves were far from being full.
Global gas supply struggles to meet rising demand
But, contrary to the repeated expressions of self-satisfaction by the European Commission, the last one two months ago, Europe has still not resolved the basic problem of the security of its gas supply in financial conditions that are not too good. penalizing.
Because as the International Energy Agency (IEA) points out in a report published at the beginning of the month, global gas consumption is expected to increase sharply in the coming years, which poses a problem for security of supply. given the limited short-term potential for increased LNG supply and geopolitical tensions. Illustration, for the first time in 24 years, American shale gas production decreased slightly during the first months of 2024. This is due in particular to the low gas prices in the United States which means that production is no longer profitable in some regions. The price of gas in the United States is approximately three times lower than in Europe, which is not without significant consequences on the difference in activity and competitiveness of the American and European economies.
Demand Destruction
Because another of the major reasons, apart from mild weather, which allowed the EU to overcome the crisis born from the invasion of Ukraine by Russia in February 2022 and the sabotage of the NordStream 1 and NordStream gas pipelines 2 in September 2022 is due to a considerable drop in its gas consumption. It is the consequence of accelerated deindustrialization due to soaring energy prices and loss of competitiveness. We can possibly welcome this in the name of limiting greenhouse gas emissions and a (real) improvement in energy efficiency, but it is a de facto impoverishment. According to the State of the Energy Union report, this demand destruction amounted to 138 billion cubic meters between August 2022 and May 2024, which is considerable.
Europe is in fact still faced with two difficulties. Being able to access sufficient quantities of gas and not be too subject to permanent price fluctuations. Last week, benchmark gas prices in Europe reached their highest level in a year following news of a production incident in Norway. Prices rose to 43.68 euros per MWh. Norway is currently the largest supplier of natural gas to the European Union and meets around 30% of its needs. When Equinor reported the incident, the Norwegian company immediately indicated that it did not endanger its export commitments. Yet gas prices immediately skyrocketed…
Russian gas still accounts for 18% of European imports
In fact, the EU is still incapable of completely doing without Russian gas and it has exchanged one dependence for another, namely today cargoes of LNG (Liquefied Natural Gas) from the United States and Qatar. The European Commission itself admitted this in its report on the State of the Energy Union, published in September. “ The share of Russian gas in EU imports fell from 45% in 2021 to 18% in June 2024, while imports from trusted partners like Norway and the United States increased », Writes the EU. But no matter how much she highlights the switch to Norwegian and American gas, the fact is that Russia still supplies more gas to Europe than the United States…
One of the avenues pursued by the European Union to diversify its sources of supply is called Azerbaijan. It could replace, in part, the Russian gas still circulating until the end of the year to Europe in the Ukrainian gas pipeline network. The contract which still allowed, rather incongruously, Russian gas to transit via a pipeline through Ukrainian territory to arrive in Europe, was finally denounced by Ukraine. Last year, 14 billion cubic meters of Russian gas passed through Ukrainian territory. Austria, Hungary, Slovakia and Italy were the main beneficiaries.
Unless the EU finds a substitute for Russian gas, it could end the winter, if severe, with gas stocks only 30% full and prices high. It will then be in a complicated situation in 2025-2026. For comparison, last winter, Europe got through the cold season without any problems with stocks 58% full. But we cannot always bet on luck, especially when it comes to energy.
