How to explain the paradox of gas stocks full as ever for this winter and the alarmist announcements regarding next winter, which the IEA, the International Energy Agency, has just confirmed in its calculations published a few days ago .
The IEA has the merit of aligning figures that leave no room for doubt: if we have been able to replenish our stocks, it is thanks to the reduction in our consumption, of the order of 40 bcm (billion cubic meter = billion cubic meters). It is also thanks to the Russian gas which nevertheless reached us in large quantities in the first half of 2022. It is also thanks to China which, from confinement to confinement, has its economy still at half mast and has not no more gas purchased on the spot markets. It left us the field free to obtain LNG gas (+23 bcm) to the detriment also of the countries of South Asia, which are more sensitive to prices. Pipeline deliveries from countries other than Russia have been increased. There is nothing more to take on that side for winter 2023-2024: Azerbaijan (+50%, 3 bcm), Norway (+5% or 5 bcm), Algeria (+ 10% or 3 bcm) now deliver everything they can (and hopefully not sabotaged in hybrid warfare). Moreover, it is not these capacities that have compensated for the reduction of 60 bcm of Russian gas which did not reach us over the whole of 2022.
How lucky
We were really lucky warns the IEA because we managed to reconstitute our reserves despite the state of electricity production from nuclear power in France and from hydraulic power with the summer we experienced. The injection of gas into inventories thus increased by +22% compared to the average of the previous 5 years. This figure alone should convince us of the exceptional circumstances in force this season. And we are not even talking regarding this month of October so mild that it reduced the demand for gas by 30% in the distribution networks which supply gas to individuals and the commercial sector.
But at that time, the LNG carriers were already on their way to Europe. Result: one-month prices on the TTF market fell to 100 EUR/MWh at the end of October (which remains several orders of magnitude higher than the average over 2016 to 2020). As for the price for overnight delivery, prices tended towards a low of 30 EUR/MWh. We even saw hourly prices turn negative on October 24! The first cold spell this winter will unfortunately bring some order to these prices while the markets will be cautious before having to line up for deliveries.
Depending on the scenarios, our gas stocks in Europe at the end of this winter will vary from 5% to 35% depending on many variables: prices, weather and Europe’s energy policy from now on. It is better to start the next winter with 35% than 5%. It’s simple, the season to fill stocks in the winter of 2023-2024 has already (poorly) started.
Chinese restart
In 2023-2024, not a drop (so to speak) of Russian gas will reach us (out of the 140 bcm imported last year). China, which has long-term gas contracts, will not leave us any more. It has already asked its gas sector to no longer resell gas in Europe and the rest of Asia in anticipation of its recovery which will come with the end of the Covid confinements: the stock markets are already anticipating this. China imported, in 2021, 108 bcm of LNG gas. If we want to be optimistic, we might still receive 25 bcm of Russian gas if Putin keeps his deliveries at the current level in 2023, but does anyone believe it?
There is virtually no more domestic gas production: the Groningen gas fields are limited to a production of 2.8 bcm for next year. Denmark will relaunch its production but it will not start until 2023-2024 at best, too late. The UK has already restarted everything it might in production. However, if China restarts, it will capture 85% of the increase in LNG in sight for next year thanks in particular to three terminals which will have either increased their capacity or restarted. This is without taking into account the congestion of LNG shipyards until 2027: Korean manufacturers are saturated. It is once once more China that takes over. The Japanese, once market leaders, have a technological backwardness that puts them out of the game. In the first half, 94 LNG carriers were ordered for an amount of 20 billion US dollars (USD), compared to 86 in the whole of 2021. The price of an LNG carrier rose by 25% (to 250 million USD per unit). Even the rental of LNG carriers has doubled (350,000 USD per day).
To complete the dark picture, we must not forget Ukraine and its empty 14 bcm stocks. Solidarity must play!
Europe will lack, by the door or by the window, for the winter of 2023-2024 30 bcm of gas. If we manage to restore our energy production capacities through dams and nuclear power, the deficit is still 22 bcm. We must no longer rely on gas, says the IEA: our salvation will come from a massive deployment of alternative energies in production and self-production, heat pumps, energy efficiency, accelerated deployment of renewable energies (cf. ., in France, the ambitious law on renewable energies), the migration to other types of fuels in industry when possible and, finally, the change in our behavior. All governments must now reach out, agree and strengthen themselves to help the population equip themselves, otherwise, once once more, only those who can afford it will be able to afford it and that will not be enough! And all this in 12 months.
Pour en savoir plus : Never Too Early to Prepare for Next Winter : Europe’s Gas Balance for 2023-2024, AIE, Nov 2022
