ANP extension
ANNOUNCEMENTS•
Brings low gas prices momentum and a well-stocked gas supply, Europe appears to get through this winter relatively unscathed. But the big question is whether it will work next winter as well.
Stocks for the cold months of 2023 and 2024 will not be able to be filled with large quantities of Russian gas. What are the other options? And at what price? We list it in this article.
What’s the stock now?
Let’s first take a look at the current gas reserves in the Netherlands, stored underground at Bergermeer, Norg and Grijpskerk, among others. Last October, it reached its highest fill level, more than 93 percent.
Then the colder months set in, so we had to use gas from that depot again. Underground deposits in the Netherlands are still 77% full:
NO
Other European countries also have this type of gas storage; they had an average fill level of 88% in mid-December. This is also important for the Netherlands, because the agreement stipulates that the countries help each other if there is a threat of shortages.
The International Energy Agency (IEA) estimates that by the end of the heating season, gas supplies will be between 5 and 35 percent full. The hotter it stays in the coming months, the more gas reserves will remain and the less will need to be added for next winter.
What gas do we refuel that supply with?
In recent years, we have obtained gas in Europe from three main sources: production within the European Union (such as Groningen), pipelines (mainly Russia and Norway), and ships that have brought liquefied gas.
In 2021, around 30-40% of European gas came from Russia. This has become much less last year, even though some of Russia’s gas still comes through pipelines:
NO
The leeway to compensate for the lack of Russian gas is slim. European production cannot be further increased; for example, gas extraction in Groningen has been phased out in recent years.
Azerbaijan and Algeria have started supplying more gas, but not enough to make up for the shortage. Norway has also increased production, but cannot increase it further.
And so next year Europe will depend heavily on the third source: liquefied gas (LNG). This is gas that has been cooled to -162 degrees Celsius, making it liquid, and can be transported across the ocean in large tankers. After arrival it is converted into “regular” natural gas.
Is there enough liquefied gas?
The good news is that many LNG producing countries have increased their exports. So there is much more available in the global market.
The US in particular is now supplying much more LNG to Europe. Russia still supplies liquefied gas:
NO
But there is also a big factor of uncertainty: China. That country was under lockdown for much of 2022, as a result of which demand for LNG was around 20% lower than in previous years. European countries could then easily buy the liquefied gas.
Once the Chinese economy is up and running again, the vast majority of extra LNG on the world market will once again be absorbed by China. The country has already largely established this through contracts. Other Asian countries also rely heavily on liquefied gas for heating their homes.
What will we pay?
Only at the end of March, when the global warming season is over, do we know at what price we have to replenish our stocks. “That’s when it gets exciting, because then we have a lot of competition,” says energy expert Lucia van Geuns of the Center for Strategic Studies in The Hague.
“That could drive up the price. The question is, who will pay the highest price for the remaining LNG?”
And are we introducing liquefied gas?
The liquefied gas enters through large ships, which must dock in special terminals. Terminals are now being built at lightning speed all over Europe where that gas can be converted.
Not all countries had such a terminal, so now many plans have been made:
NO
Before the Russian invasion of Ukraine, for example, Germany did not have its own terminal and was therefore unable to pump gas from a ship. The country is now building it at lightning speed; this week, for example, the first tanker arrived at the Wilhelmshaven LNG floating terminal.
The Netherlands has been able to receive LNG ships for some time in the port of Rotterdam. But we also want to be able to import more liquid gas. That is why the terminals in Rotterdam and Eemshaven are being expanded and one in Terneuzen is planned.
What if you can’t buy enough gas?
The International Energy Agency predicts that if Russian gas through pipelines stops completely and China imports liquefied gas again as in 2021, we will have a deficit of 27-30 billion cubic meters in Europe this summer to fill the our stock.
This is almost half the gas needed to bring the European fill level to 95%. According to the IEA, therefore, there is no other option than to save even more gas than now.
By 2022, European countries have managed to use more than 20% less gas than in the years before the Russian invasion of Ukraine. This is partly due to the warm climate:
NO
For savings, energy sources are also being evaluated, which this year can make up for gas consumption. For example, the IEA hopes that France will once again be able to produce more nuclear energy and that hydroelectric plants in southern Europe will also generate more. Also be watched coal-fired power plants.
According to the IEA, in addition to all the above measures, Europe cannot avoid further reducing gas consumption and investing in energy saving measures and renewable energy sources. The agency also recommends large-scale installation of heat pumps. Around EUR 100 billion is needed for all measures.
