WHILE Europeans bask in the warmth of spring, governments are in a race against winter.
Europe is trying to cut use of Russian natural gas because of the war in Ukraine, but still find enough fuel to keep the lights on and homes warm before it gets cold again.
That has sent officials and utilities racing to fill underground storage with scarce supplies of natural gas from other producers — competition that further raises already high prices as utility bills and business costs soar. Italy has announced new supplies from Algeria, while Germany has outlined an energy partnership with Qatar, a major supplier of liquefied gas that arrives by ship.
While those deals offer a long-term boost, they likely will have little impact on the crucial winter supplies that will be decided in the next several months. For now, the scramble in Europe is a zero-sum game: There’s little or no spare gas available to snatch up, and any supply that a country manages to get comes at the expense of someone else in Europe or Asia.
The limited number of export terminals for liquefied natural gas (LNG) in Qatar, the US and other LNG-exporting countries are booked solid, and new ones will take years and billions to build. On top of that, a plan for the 27-nation European Union to buy gas jointly looks good on paper but faces practical hurdles.
“There’s no additional supply,” said James Huckstepp, manager for Europe, Middle East and Africa gas analytics at S&P Global Commodity Insights. “The increase in LNG that we’ve received is mostly thanks to demand destruction and switching in Asia. And there’s limits to that.” Asian users have been moving to oil or coal, and Chinese demand has dropped amid Covid-19 lockdowns.
Europe’s scramble for energy has focused on bringing in LNG, with supplies increasing to a record 10.6 billion cubic meters in April. But there’s a long way to go — Russia sent 155 billion cubic meters of natural gas to Europe annually before the war. Europe wants to slash that by around 100 billion cubic meters by year’s end and still stay warm this winter.
The EU’s executive commission has proposed conservation, renewable development and other measures to reach that goal, with Germany and other countries heavily dependent on Russian gas opposing calls for an immediate gas cutoff.
S&P Global Insight expects that Europe won’t eliminate most Russian gas until 2027. (AP)