The Russian energy weapon has lost its terror, as did the “Neue Zürcher Zeitung” (“NZZ”). According to FT, prices are still at an all-time high, and although this is painful, the gas price is at a level that most western European economies can just about cope with. Widespread bottlenecks, which were once justifiably feared, have not occurred, the “FT” continues.
According to EU Commission President Ursula von der Leyen, gas prices in Europe have fallen faster than expected. European natural gas prices have fallen 80 percent this month from their August peak of 350 euros per megawatt hour, von der Leyen said at the World Economic Forum in Davos this week. “That’s lower than before the war in Ukraine.”
From Russia to the USA
Von der Leyen cited the joint efforts of the EU as the reason for the development. Europe has overcome dependence on fossil fuels from Russia and has replaced around 80 percent of Russia’s pipeline gas. In addition, the gas storage facilities have been filled and demand reduced – by more than a fifth between August and November.
According to Quartz, the lack of Russian gas in Europe was partly offset by increased imports from the USA. This shift could make the US Europe’s leading energy supplier this year, it said.
Cold wave could cause prices to rise again
Against the backdrop of Russia’s war of aggression against Ukraine and the sharp drop in Russian gas supplies to Europe, gas prices had risen sharply in 2022, peaking in August. When the Ukraine war broke out in February last year, gas cost around 120 euros per megawatt hour. Most recently, the average price was between 50 and 60 euros per megawatt hour.
The reason for this is, among other things, the mild winter caused by the climate crisis. In the event of a cold spell, however, energy prices could rise again, the Financial Times speculates. But even if Russia were to further reduce its supplies, that would not cause panic, the storage facilities are sufficiently full, the “FT” also writes.
Kremlin budget hit
However, it would be foolish to rule out further price fluctuations, according to the FT. But the end of Russia’s energy war is only a matter of time, the FT continued. Over the past year, higher gas prices for Moscow more than offset the loss in volumes sold. But that now seems unlikely. Western sanctions have effectively halved the price Moscow can fetch for its oil and hit the Kremlin’s budget, the FT said.
By 2024/25, more liquefied natural gas (LNG) will come onto the world market. That would further ease the supply situation and make extreme price peaks less likely. There is a small risk, if the demand for gas in the industry increases, this could also increase the gas price again. However, the expansion of renewable energy must be accelerated in order to eliminate the strategic weakness exploited by Putin, the FT continues.
Already three LNG terminals in Germany
With the new LNG liquefied gas terminal in Brunsbüttel, Germany has now replaced about a quarter of the lost delivery volume from Russia. With the third LNG terminal in the north, capacities of 14 billion cubic meters of gas have now been built, said German Economics Minister Vice Chancellor Robert Habeck (Greens) on Friday in Brunsbüttel in Schleswig-Holstein. In the course of the war in Ukraine, Germany lost 55 billion cubic meters of gas from Russia, which must be replaced.
After an unusually short planning and approval period, three LNG projects have already been launched in the past few weeks – in Wilhelmshaven, Lubmin and now in Brunsbüttel. “There have to be more.” For the time being, gas is still necessary for the energy supply. The other LNG projects would also have to be implemented quickly. According to the German Ministry of Economic Affairs, the floating terminal in Brunsbüttel will accept liquid gas from LNG tankers and feed it into the German gas network. The annual regasification capacity is estimated at 7.5 billion cubic meters, which is expected to be fully utilized by the end of 2023.
IEA: Oil exports in December at lowest level 2022
The International Energy Agency (IEA) also assumes that Russian oil exports will fall following the European Union’s oil embargo. These are likely to have fallen to their lowest level in 2022 in December, according to the IEA report.
According to the association’s estimates, Russia made 12.6 billion US dollars in revenue from the sale of crude oil and fuel in December, significantly less than in November. In the course of the past year, however, Russia was able to achieve a significant increase in revenues overall due to the higher prices.
Russia is also sending less and less gas through Ukraine to Europe. According to the state news agency TASS, a daily volume of 25.1 million cubic meters will be pumped through the country, 28 percent less than in the past few days. Despite the war, Russia continued to pump around 40 million cubic meters a day through Ukraine for months afterwards. At the beginning of this year, however, the amount dropped.
Gas supply secured in Austria
Despite the energy crisis, the gas supply in Austria is secured this winter. The memory is currently 87 percent full. That corresponds to 83 terawatt hours (TWh) of gas. The supply situation was secured, for example, by the high storage level at the beginning of winter and high temperatures for the time of year, according to a background discussion by Austria Gas Grid Management (AGGM) on the sidelines of the Austrian Gas Infrastructure Day on Thursday in Vienna.
A high storage level after the winter is still “fundamental” in terms of security of supply, it said. Replacing Russian gas is a “huge challenge”, especially when storage levels are low. From the current perspective, experts expect that the storage tanks will still be between 40 and 60 percent full after the winter in April. After last winter it was only around 20 percent.
IEA: imponderables on radar
However, the IEA believes it is possible that the energy markets could be tighter in 2023. IEA chief Fatih Birol said at the Reuters Global Markets Forum in Davos that he hoped prices would not continue to rise. This could then ease the pressure on energy-importing developing countries. “I wouldn’t be too relaxed about the markets,” Birol continued. “2023 could well be a year where markets are tighter than some colleagues believe.”
There are currently no bottlenecks on the market. But you have to have imponderables on your radar – above all Chinese demand and Russian supply. “If the Chinese economy recovers this year, which many financial institutions expect, demand could be very strong and put pressure on the markets.” In Russia, there are many question marks about the country’s export ability due to the sanctions from the West, but also in the long term own challenges that Russia is dealing with.
