When winter asks what Czech gas workers did in the summer, the answer will probably be more joyful than last year. The Czech Republic and other European countries are successfully filling gas reservoirs. As of Tuesday, July 25, domestic gas reserves amounted to 3.096 billion cubic meters, last year 2.687 billion cubic meters.
From the point of view of households and entrepreneurs, there is one positive fact. This year, storage tanks are filled with much cheaper gas than last year, which is already reflected in prices for end customers. At this time last year, gas at the Dutch trading hub TTF was around 170 euros per MWh, and its price was still controlled by Russian threats to stop gas supplies, which eventually came true. Now the price is a fifth of last year’s value, and gas costs around 30 euros per MWh.
When Russia lost control over gas prices after the still-unexplained explosions on the Nord Stream I gas pipeline last September, and even catastrophic scenarios regarding energy shortages did not materialize, the price was mainly driven down by falling demand for the raw material in the EU. “It is really surprising how even prices below 30 euros per MWh cannot sufficiently kick-start last year’s reduced demand in the industrial sector. With the arrival of the winter season, the demand associated with the use of gas for heating will appear again,” explains Michal Kocůrek, managing consultant of the EGÚ Brno consulting company.
However, the price will also be affected by other factors that are already causing its decline. “I believe that Europe will manage to purchase gas reserves together. Price ceilings on electricity and gas prices plus the willingness of European governments to resolve the situation in the end calmed down prices. And that still applies,” says Václav Bartuška, special representative of the Ministry of Foreign Affairs for energy security.
But the key unknown is how cold the winter will be in the Czech Republic. Bartuška has repeated in the past that two more hard winters await Europe, and he still stands by that. “Just because it’s warm and nice in the summer doesn’t mean it won’t be very cold in November,” thinks Bartuška.
However, prices and gas availability depend not only on the weather in the old continent, but also in East Asia, which is the world’s largest importer of liquefied natural gas (LNG). A great interest in gas logically means its price increases.
“I think we should not underestimate the potential of Chinese demand, which, by the way, has moved significantly to year-on-year growth in the last two months. In June, LNG imports to China were 40 percent higher than a year ago,” says Kocůrek.
However, according to him, due to the war in Ukraine, China began to produce much more of its own gas. “The June increase was primarily due to an interesting drop in spot LNG prices. From this, we can only read the small willingness of Chinese customers to overpay financially strong Europeans and the fact that China will only import LNG at prices acceptable to it,” explains Kocůrek.
However, the price may also increase due to the interplay of unexpected negative events. “The question is whether or not there will be some kind of physical attack on the European gas infrastructure. Last year showed that we are vulnerable. If someone were to seriously damage the main gas pipelines to Europe or there was an unexpected malfunction of one of the main LNG terminals, he would not have a problem. But we can’t bet on any of these things,” warns Bartuška.
In the case of a simultaneous combination of several of these factors, not necessarily all at once, similar price fluctuations as we experienced last winter can be expected in the short term. However, not the record values from last August.
Michal Kocůrek, managing consultant of the consulting company EGÚ Brno
So far, however, everything looks optimistic, and since Europe has managed to replace Russian gas from other regions, there is no longer any need to worry about its shortage. The only question for now is how high the price can rise. Even stronger demand in South Asia and China, as well as a targeted stoppage of gas imports from Russia to Europe, can be added to the unpredictable events. Considerable volumes still flow through Ukraine.
“With the simultaneous combination of several of these factors, not necessarily all at once, we can expect similar price fluctuations in the short term as we experienced last winter. However, not the record values from last August,” Kocůrek describes.
Energy prices reached record highs last summer. They crossed the threshold in March, when MWh of electricity was traded for more than 1,000 euros.
However, Europe replaced Russian gas on the basis of short-term contracts with other countries, so countries including the Czech Republic are exposed to more significant fluctuations in world gas prices, which also spill over into European gas prices. The problem is precisely their short duration. The same rule applies here as for households, with a contract for a longer period of time, people do not have to worry about what happens on the stock market every day or week. But for short-term contracts, yes. “Unfortunately, in this sense, we are similarly prepared as last year,” adds Kocůrek.
However, the price is currently calmed by the amount of gas in European reservoirs. Although they are fuller this year than last year, according to data from the Energy Regulatory Office, 4.85 billion m3 of gas was imported into the Czech Republic in the first half of 2022, and 3.71 billion m3 of gas flowed in during the same period in 2023.
“Of course, it is due to other consumption, which is lower this year than last year. Also, the state of the reservoirs at the end of the winter of 2022 and 2023. This year, 1.3 billion cubic meters more remained in the reservoirs at the end of March than a year ago. Therefore, the import of gas was not so necessary,” Kocůrek explains the situation.
High energy prices are also reflected in factors that influenced the price of energy even before the events of last February, i.e. the prices of emission allowances and European requirements for energy decarbonisation.
2023-07-25 17:00:33
#severe #winter #attack #gas #pipeline #prospect #cheap #gas #News #List
