Europe’s energy crisis: Did Putin’s suggestion of more gas make any difference?

Three months after Vladimir Putin suggested Russia could help ease Europe’s energy crisis, experts say little has changed.

With the onset of winter in Europe, declining gas reserves and supply problems on the continent have driven up the cost of energy.

said Jack Sharples, a researcher at the Oxford Institute for Energy Studies who is also an expert on Russia and Gazprom.

Putin had suggested again in October that Russia’s state-controlled Gazprom sell more on the European spot market, an announcement that appeared to dampen sky-high prices.

But even after Russia filled up its domestic stockpile in November, there was little change from the European side.

“If you look at the numbers, you will see a little bit of activity from Gazprom, but it is really very limited and there is nothing close to what is needed to go back to suppose historical levels of Russian supplies through the pipeline,” said Dennis Hessling, head of infrastructure, gas and retail at the agency. European Union for Energy Regulators Cooperation.

On Thursday, the European Commission said it was examining Gazprom’s behavior as some analysts raised concerns that Russia’s actions could be aimed at pressuring Europe to give the green light to the new Nord Stream 2 pipeline.

Putin said in late December that Nord Stream 2 could help ease gas prices while adding that Gazprom had increased its gas exports. But others said temperatures are low in Russia as well, leading to potential supply problems.

“It’s really thought-provoking that the company, given the increasing demand, is limiting supply. This is a very rare behavior in the market,” European Competition Commissioner Margrethe Vestager said Thursday when asked about Gazprom.

Her comments came after the head of the International Energy Agency (IEA) delivered his strongest criticism yet of Russia, noting that this is likely part of the reason for high gas prices in Europe.

“We see strong elements of ‘artificial tightening’ in European gas markets, which appears to be due to the behavior of the state-controlled Russian gas supplier,” International Energy Agency Executive Director Fatih Birol said in a statement posted on social media.

“Unlike other pipeline suppliers – such as Algeria, Azerbaijan and Norway – Russia reduced its exports to Europe by 25% in the fourth quarter of 2021 compared to the same period in 2020 – and by 22% compared to its 2019 levels.”

Birol added that the IEA estimates “Russia could increase shipments to Europe by at least a third, or more than 3 billion cubic meters per month” or about 10% of Europe’s average monthly gas consumption.

Experts say it is one of the contributing factors to the so far inexhaustible natural gas crisis.

“The prices are very high at the moment. “Even after winter is over, after March, the contracts being signed at this moment for future delivery are still at a high level of prices,” Hesling said.

There are still LNG supplies globally, said Doug Wood, chair of the European Union Gas Committee for Energy Traders.

“We still see some opportunities to increase production and there are discussions going on with the major producing countries. So we are not in an emergency situation yet. The market is still working. There is still some liquidity. Only prices are high,” he said. .

European low gas storage

One of the current problems, Hesseling says, is that European gas storage is at a seven-year low.

The level of gas storage is about 49% compared to about 65% at the same time last year, according to Gas Infrastructure Europe.

“There are concerns about storage drawdowns because of course, there is a need for storage to make sure there is enough gas available throughout Europe during the entire winter period and especially in the later part of winter, you still need enough stock to properly withdraw it,” Hesseling said.

“And technically, the moment your storage gets too low, the ability to deliver gas actually becomes less effective, so you can withdraw less easily from the gas storages.”

The main problem, says Sharples of the Oxford Institute for Energy Studies, is that if there is a cold snap this winter, Europe could withdraw more gas from storage, causing more problems in the future.

“The EU and the UK currently have about 52 billion cubic meters (one billion cubic meters of natural gas) in storage and on average the last five years between mid-January and … March 31, the five-year average takes about 33 billion cubic meters From storage in that period, Sharpless said.

But if there was a particularly cold period that drove up demand in East Asia as well, Europe could come close to emptying by the end of winter.

This will affect natural gas prices over the summer and into next winter as well, as European countries work to refill storage.

“I think if we have a cold in the next couple of months and can pull a lot of storage, the need to replenish resources will keep prices relatively high over the summer,” Sharples said.

Is investing in renewable energy sources key?

Experts say last winter’s cold snap was one of several causes of the current crisis in which Europe finds itself. The pandemic was another major factor, affecting natural gas field maintenance and other supply-side problems.

This in addition to the phasing out of coal and the decline in renewable energy production has led to higher demand for natural gas across Europe and Asia.

International Energy Agency chief Birol said natural gas is also having an impact on electricity markets that use it as a marginal fuel, a crisis “aggravated by lower-than-average hydropower production and lower nuclear production”.

He says that stronger investment in renewables must happen quickly, “otherwise global energy markets will face a turbulent and volatile period ahead.”

Part of the problem, Doug Wood said, is that there remains a challenge with the seasonal supply of electricity, as renewables cannot currently provide swing capacity during the winter months.

“That’s part of where we’re at right now where a lot of people see gas as having a very important role to play in this transition, which is affecting gas demand, not just now as a facilitator for the introduction of renewables. And that’s continuing,” Wood said.

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