Healthy gas storage warms Europe, but not enough | – #Healthy #gas #storage #warms #Europe

OSLO, February 23 (Reuters) – Europe near record levels gas As it emerges from a mild winter with its stockpile, it must prepare for another costly race to increase its reserves in the international market.

Europe dig in prices It increased on the eve of Moscow’s intervention in Ukraine, which began almost exactly a year ago and Russia then hit record highs when it cut off supplies of relatively cheap pipeline gas.

Europe prices from a peak of over €340 last August to around €50 per megawatt hour (MWh) (53 USA dollar), but they remain higher than historical averages.

This means that European governments have another big to fill the warehouses before the winter peak demand law facing the project.

They are what the continent has depended on for decades to avoid market volatility and protect against shortages Russia they will have to repeat the exercise every year until they develop a more permanent alternative to pipeline gas.

Analysts and executives say the amounts already in stock, after an unusually extensive overhaul France will help increase nuclear production.

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Markus Krebber, CEO of RWE ( RWEG.DE ), Germany’s largest utility, said, “Currently gas “The situation in the market is not so tense anymore,” he said.

He did not expect a repeat of last year’s record price increase, but added that “one should not be lulled into a false sense of security.”

Similarly, analysts cautioned against leaving it too late to buy for future deliveries.

“We don’t expect charging storage to be as expensive next summer as it was last year,” said Jacob Mandel, principal analyst at Aurora Energy Research.

“This means firms that rely on spot supplies to fill inventory rather than hedge against future price spikes will risk paying similar costs last summer,” he said.

He estimated that buying gas in the summer would “cost 2 to 2.5 times more than before the crisis” and that European governments spent tens of billions of euros on supplies last year.

This is a significant amount even before the Nord Stream pipeline to Germany shut down in August under long-term contracts Russia it was when they bought the gas.

Shutting down the “North Stream” Europe gas increased its prices as well as liquefied natural gas (LNG) prices to about $70 million compared to the current $16 Britain thermal unit (mmBtu) reached record levels.

CONTRACTS

Industry sources say that Russia’s long-term contract based on complex calculations prices not open, but much cheaper than the spot market price.

Overall, European imports of Russian pipeline gas last year were 60% lower than the average of the previous five years, 62 billion cubic meter (billion cubic meters).

According to forecasts of the International Energy Agency (IEA), this year the “Turkish Stream” pipeline and Ukraine provided that the flows through its territory correspond to the volumes of December 2022, 25 percent of Russia’s supply to the EU billion it is expected to decrease to cubic meters.

Reuters GraphicsLNG UPDATED RESOURCES FOR NOW, FUTURE

Even when full to the brim, approx 10Europe’s storage caves, which can hold 0 billion cubic meters, can only meet a quarter of Europe’s demand.

Bruegel, a think tank that provides analysis to EU policymakers, has called for a 13% curb in demand this summer, compared with the EU agreement of a voluntary reduction of 15% last year.

That may be difficult, as the drop in gas prices this year has reduced the incentive to run on fuel.

Reuters graphics

One of the reasons for lower gas use last year was an increase in the use of cheaper coal, which is worse for carbon emissions.

James Waddell, head of European Gas and global LNG at Energy Aspects, said gas was competitive with coal in the power sector and other industries switching to alternative fuels to gas could make a comeback.

“If you put a price below €60/MW and go down to €40/MW, you will get quite a lot of gas going back into the industrial sector,” he said.

Waddell said more French nuclear production would help Europe’s overall situation, as output would rise to about 310 Terwatt-hours (TWh) from 280 TWh last year.

But he said that was still below the five-year average and that earnings would be dampened by losses elsewhere, particularly in Germany.

Ultimately, the solution to gas shortages must be more renewable energy, industry analysts say, as the EU strives to reach its goal of net-zero greenhouse emissions by 2050, and the energy crisis will accelerate progress.

Helge Haugane, head of gas and energy trading at Equinor ( EQNR.OL ), Europe’s biggest gas supplier, said even full storage was not guaranteed until then.

As global supplies remain tight, the market remains vulnerable to any disruptions or “weather events” will be very sensitive, he said.

An unusual level of uncertainty

After a Herculean EU effort, gas storage was 96% full at the November peak last year.

According to Gas Infrastructure Europe (GIE), they fell to 64%. Analysts predict a further drop to 55% by March 31, the end of the official heating season.

The levels continued after a mild winter, which, along with falling demand, led the IEA to lower its forecast for EU gas shortages.

Reuters graphics

Earlier this month, it said demand was 57 billion cubic meters lower than its previous estimate.offer put the gap at 40 billion cubic meters this year.

Energy efficiency and the rapid deployment of renewables and heat pumps could help fill the 37 billion cubic meters of this gap in 2023, while warning of “extraordinarily wide uncertainties and exogenous risk factors”.

These include the possible complete shutdown of Russian gas through pipelines that still supply Europe and the recovery of demand in China after the lockout, which could increase competition in the international LNG market and make it harder for Europe to buy there.

The IEA said European LNG imports could provide an additional 11 billion cubic meters to 140 billion cubic meters this year, in addition to an additional 55 billion cubic meters in 2022.

Last year of Ukraine Germany, one of Russia’s most loyal gas customers until its invasion, previously had no LNG import capacity. It is now bringing six floating storage and gasification units (FSRUs) online by the end of this year, at a record pace.

Luke Cottell, senior analyst at consultancy Timera Energy, said the industry says it needs to match more terminals to liquefy and ship LNG, but strong global demand will make this difficult to achieve over the next 24 months.

Other European countries are also increasing LNG capacity, with environmental campaigners and green politicians questioning the amount of investment in infrastructure that will become irrelevant in a low-carbon economy.

Germany will also use fossil fuels to heat buildings trust heat pumps are in first place in demand, although their installation last year still outpaced gas-based systems.

($1 = 0.9395 euros)

Reporting by Nora Buli in Oslo and Bozorgmehr Sharafedi in London; Additional reporting by Kate Abnett in Brussels and Vera Eckert in Frankfurt; Edited by Barbara Lewis

Our standards: Thomson Reuters Trust Principles.

2023-02-23 10:38:23
Source – reuters

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