WSJ: Future EU winters could face energy crisis despite 95% storage
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The EU has filled 95% of its gas storage for this winter, however, this amount is expected to run out by the summer of 2023 and new supply will be limited.
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EU gas storage projected to end by summer 2023 (Reuters)
The European Union's gas storage is about 95% full, and many analysts believe the continent might avoid an energy catastrophe this winter. Although Europe has filled its reserves of natural gas for this winter, the continent sought to secure energy for the coming years, which are also expected to remain tormented by threats of energy scarcity, according to The Wall Street Journal.
However, it is expected that getting gas for the upcoming winters will be harder for European nations now that they are mostly cut off from Russian supplies and there is increasing worldwide rivalry for limited supplies of liquefied natural gas.
There will be little new LNG entering the market until approximately 2026, when planned projects in the United States and Qatar come online, and Europe will likely compete for limited supplies over the next few years. Some businesses in Germany, the hub of European manufacturing, are concerned about running out of energy in the near future.
According to persons involved in the negotiations, German corporations have recently conducted discussions with American LNG exporters and others about potential gas supply deals that are set to start after mid-decade, including chemical company BASF SE and others.
Following the war in Ukraine, some European companies signed contracts for US LNG which they now believe they will need for several years to come. While several companies have been looking to sign a 5 to 10 year gas supply agreements, some company and government officials are reluctant to sign such longer-term contracts.
German government officials are monitoring the negotiations over gas supply, including parallel talks with the Norwegian oil and gas giant Equinor ASA, and at times proposing businesses that exporters could contact, according to sources.
Long-term contracts vs climate goals
Gas purchases are the responsibility of businesses, according to a spokesperson for the German Ministry of the Economy and Climate. In a recent interview, Anders Opedal, the chief executive officer of Equinor, stated that they are "working closely with German industry to find common ground for potential future investments," in both oil and gas as well as low-carbon energy.
A spokesperson for RWE AG, a German energy company, said “We are not totally convinced about the benefits and advantages that can be achieved by bundling the gas procurement on a European level,” at a time when EU officials had proposed forming a collective of European companies to coordinate energy supply contracts.
Furthermore, the spokesperson also urged governments and companies alike to sign long-term contracts.
A UK spokesperson said it had worked domestically as well as internationally with suppliers in order to reach contracts that would secure the country's energy supplies.
However, there remains some hesitation towards long-term contracts given that they would hinder the climate goals set by the nation.
“It’s difficult to see how they’re compatible with decarbonization plans,” said Jill Duggan, executive director for Europe at the nonprofit Environmental Defense Fund.
German officials previously said they expect the country’s natural-gas demand to peak around 2030, then gradually give way to more renewable energy.
Some business executives in Europe are concerned that the safety net is just transitory and that a lack of political commitment puts future winters in jeopardy. This month, the Paris-based International Energy Agency issued a warning that Europe faces the possibility of not being able to satisfy its energy demands in the upcoming year and encouraged the continent to increase gas conservation and transition to other renewable energy sources.
According to IEA projections, Europe might run out of natural gas by the summer of 2023, which would be a significant portion of what the continent needs to refuel its gas storage system before the onset of winter. Keisuke Sadamori, director for energy markets and security at the IEA, declared that Europe "basically needs to do everything it can."
Read more: Next winter will be challenging - EU
