China’s demand for gas may affect Europe more than giving up Russian gas / Article

IN SHORT:

• China’s faster economic growth this year may increase its demand for gas.
• International Energy Agency: China’s demand – “the great unknown”.
• The sharpest rise could increase China’s LNG imports by 35%.
• Such a scenario could push gas prices back up to “unsustainable” levels.
• China’s total gas consumption in 2023 could increase by almost 7% per year.
• Uncertainty with Chinese demand could hurt Europe’s gas supply.
• The impact may be greater than from stopping gas flows from Russia.
• Energy savings, warm winter, US supplies provided Europe with gas this winter.
• This year, gas demand in Europe could decrease by 3%, gas must be sought anyway.

The International Energy Agency recognizes that

China’s potential demand for gas is still characterized as the “great unknown” – it is not known how soon and to what extent this demand will grow.

China’s faster economic growth should increase its gas needs this year, but whether it will increase gas purchases to previous years’ levels is not known.

The agency estimates that a sharp rise in demand could cause China’s LNG imports to rise by as much as 35% this year. This would happen if costs in China continue to fall and the country’s economy expands rapidly. The International Energy Agency acknowledges this in its quarterly report published this week, saying such a scenario would boost global competition for gas and could push prices back to the “unsustainable” levels of last summer.

The International Energy Agency said the gap between the lowest and highest potential net LNG imports for China this year is 40 billion cubic meters.

At the top end of the range, China’s imports will grow well above their previous peak in 2021, the agency said.

On the other hand, China’s total gas consumption could increase by almost 7% in 2023.

Therefore, the agency estimates that the uncertainty with China’s demand for gas supply to Europe can be more damaging than the suspension of gas flows from Russia.

China has lifted strict restrictions from the Covid-19 pandemic that last year curbed its energy demand and helped Europe import record amounts of liquefied natural gas from around the world.

The increase in European imports last year was estimated at around 63%, and it was 66 billion cubic meters of gas more. The US supplied the bulk. Coupled with energy conservation measures and mild winter LNG purchases, Europe got through the heating season with much lower Russian gas flows and reduced gas prices by more than 80%.

“Liquefied natural gas imports have increased from 80 billion cubic meters in 2021 to 135 billion cubic meters in 2022,” European Union Energy Commissioner Kadri Simsone outlines the current situation.

“At the same time, Member States have reduced gas demand by 19% between August and January, in other words, Europe has been able to reduce consumption by 38 billion cubic meters. Our overall gas storage capacity remains high at 62%. All this happened at a time when transition to green energy accelerated We can say that Russia’s energy blackmail has failed.

We expect to end the heating season with more than 50% filling of gas storages,” predicted Simsone.

Although the demand for gas in Europe could decrease by 3% this year, gas must still be sought. How to ensure stocks for next winter was discussed at the meeting of the European Union’s energy ministers this week. Both Commissioner Simson and Swedish Energy Minister Eba Busch acknowledged that the challenges are far from over.

“Energy ministers had a fruitful discussion today on how to prepare gas stocks in time for next winter. As for winter readiness, it must be said that since the beginning of the war, Europe has managed to make a lot of progress in terms of securing stocks, but one conclusion is clear – nothing yet The coming winter will bring new challenges.

Supplies must be ensured as soon as possible to avoid extreme gas and electricity prices and the worst-case scenario – gas shortages,” said the Swedish Energy Minister.

International Energy Agency and European Union officials have warned that Europe remains critical of gas consumption discipline amid lower supplies from Russia. And this aspect was also highlighted at the meeting of energy ministers of the European Union.

The ministers agreed to extend gas consumption reduction measures for the next winter as well, in order to replenish stocks more easily.

European Union Energy Commissioner Kadri Simsone emphasized at the beginning of the week that it is important to ensure Europe’s readiness for the next winter and to achieve the goal of filling the storages up to 90% by November 1.

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