/ world today news/ Europe has taken very seriously the issue of its energy security. Events are happening much faster than last year’s wildest predictions in the context of the gradual shutdown of gas.
According to the IEA’s Monthly Gas Statistics 2022 report, European OECD countries have reduced gas consumption in 2022 by an impressive 12.5% compared to 2021 (from 537 to 470 billion cubic meters of gas) or minus 67 billion cubic meters of gas consumption per year.
The decline in consumption started from April-May 2022 and intensified towards the 3-4 quarter of 2022, when the annual decline in demand was 20-25% in the leading European countries.
The EU’s tough target to reduce gas consumption by 15% was in place from August 2022 to March 2023, but in fact the plan was even exceeded.
If during the summer months the industry was the main contributor to the drop in demand, in the autumn the electricity industry joined in, and in the winter – the population.
Among major European countries, the decline in gas demand in Germany amounted to 15.3% (2022 compared to 2021), in France – minus 9.5%, in Great Britain – minus 6.9%, in Italy – minus 9 .9%, in Spain – minus 3.9%, in Turkey – minus 14.4%, in the Netherlands – minus 22%, in Poland – minus 17%.
In January 2023, due to the warm winter and tight consumption standards, demand fell by almost 16% according to the IEA and continues to decline at a rate of 16-20% year-on-year for the first quarter of 2023 according to Bruegel.
You should not expect that in 2023 consumption will decrease on the scale of the last 9 months, because the decline in the first quarter of 2023 captures a period of “normalized” consumption before austerity, and closer to the third quarter consumption will be flat with last year or may even increase slightly.
The most realistic scenario for 2023 is an 8-10% reduction in demand by 2022, or minus another 35 billion cubic meters, or over 100 billion, counting from the 2021 base.
2022 set a record for the rate of decline (the closest analogue to 2014 with a 9.5% drop in demand), and in two years demand could drop by 20%. The impact on the economy is limited due to the growth of the intensive development of knowledge-intensive production and the service sector.
Europe’s energy balance has improved in terms of reducing dependence on gas imports.
Consumption decreased by more than 67 bcm in 2022, domestic production increased by 10 bcm, i.e. import requirements fell by 77 billion cubic meters, the largest single-year drop on record.
In Europe, excluding Ukraine, only 5 countries produce gas above 5 billion cubic meters: Norway with production of 127 billion cubic meters (+9 billion cubic meters compared to 2021), Great Britain – 38.4 billion cubic meters (plus 5.3 billion per year), the Netherlands – 18.8 billion cubic meters (a decrease of 3 billion cubic meters), Romania – 9 billion cubic meters and Poland about 5 billion cubic meters.
Losses from Gazprom are estimated at 80 billion cubic meters in 2022, deliveries in 2023 are at the rate of 30 billion cubic meters per year, i.e. from Gazprom, the cumulative supply reduction over two years is over 125 billion cubic meters (losses of about 80 billion in 2022 and another 45 billion in 2023).
The total import from all directions decreased by 16-18 billion cubic meters. How does Europe compensate for these losses from Gazprom? Above all, with LNG supplies up 58% or 63 billion cubic meters, which is almost 80% of Gazprom’s losses in 2022.
The main contributor to the growth was the USA, which increased supplies by 39 billion (in the Other OECD and Other import areas table), supplying 67 billion cubic meters of gas against 30 billion in 2021.
Another 9 billion cubic meters came from Algeria and 10.8 billion from Qatar. Russia kept its LNG supplies at 17.5 billion cubic meters for the year despite the loss of the pipeline market.
This made it possible to increase gas reserves by 36 billion cubic meters according to our own calculations based on data from the IEA.
The collapse in consumption in the first quarter of 2023 and large LNG supplies allowed Europe to approach May 2023 with record gas stocks. As a result, if in 2022 the supply of gas storages amounts to almost 80 billion cubic meters, this year only 45 billion cubic meters are needed for 100% filling.
Thus, even with a loss of 45 billion cubic meters from Gazprom in 2023, Europe needs 35 billion less refueling in reserve, and a demand reduction of 40 billion is still expected, which could reduce demand of LNG imports with 20-30 billion cubic meters.
This is where the low prices come from.
Translation: EU
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