The energy crisis and inflated gas prices in Europe have laid bare an obvious contradiction in the EU’s previous energy policies and their orientation on spot trade. Not long ago, long-term gas contracts – and not only those linked to Russia – were regarded by the Europeans as a form of bondage, which would not only increase the EU’s dependence on individual suppliers, …
Oil and Gas
After the damage to the Nord Stream pipelines and a significant reduction in supplies of gas from Russia, including a complete cessation of supplies via the Yamal–Europe pipeline, the transit of Russian gas through Ukraine’s territory has remained one of the last routes for supplying the EU with gas, although it has decreased to a third of its pre-war level…
As an outcome of high-level talks in Berlin at the end of September involving German chancellor Olaf Scholz and Kazakh president Kassym-Jomart Tokayev, Kazakhstan is increasing oil supplies to Germany on a long-term basis – by around 2 million tonnes annually, and possibly even more in the future….
Gas Infrastructure Europe reported in early October 2023 that 95.99% of its gas storage facilities were filled, surpassing last winter’s peak. What’s more, the result was achieved a month and a half earlier than in the 2022-23 winter season. However, it would be premature to celebrate the success of the European energy sector, since Russian gas supplies might not prove easy to replace in the long run.
Developments in the European economy and the prospect a “long war” in western Eurasia is putting the issue of medium-term instruments to ensure European energy security on the agenda. The main elements, based on opportunities to build the European energy mix without Russian pipeline gas, have partly worked, ensuring that EU countries got through the 2023-2023 winter period with relatively low social and economic costs.
Having set itself the ambitious task of giving up bloody pipeline gas from Russia and replacing it with “freedom LNG” from across the pond, the European Union is meeting its moral obligations. However, it could unwittingly drive itself into an infrastructural trap in which it has to choose between economic and environmental collapse.
In 2022 Europe experienced its steepest ever drop in gas demand of 55 billion cubic metres (bcm) or 13%, as the International Energy Agency reports: https://www.iea.org/commentaries/europe-s-energy-crisis-what-factors-drove-the-record-fall-in-natural-gas-demand-in-2022 . At the same time expenditure on gas imports almost tripled compared to the 2021 level, reaching €400 billion.
With the introduction of the embargo on oil and oil products from Russia due to the war in Ukraine, the European Union is facing the issue of finding new sources capable of replacing Russian oil supplies. A potential solution could be to increase purchases of oil from Africa. However, experts note that we should not expect a significant growth in oil supplies from Africa in the near future.
Last year the European Union took a number of serious steps towards reducing dependence on Russian energy and diversifying its suppliers of gas and oil. In particular, in July 2022, Brussels signed a memorandum of understanding with Baku on strategic partnership in the energy sector. The document envisages that supplies of gas from Azerbaijan will double in the next five years and by 2027 Baku will supply Europe with at least 20 billion cubic metres (bcm) of gas per year.
Before the Russian invasion of Ukraine, the explosion in European gas prices and the energy paradigm shift in the minds of European elites, Russia had historically been the largest supplier of natural gas to Europe. Back in January 2021 Russia supplied around 40% of the gas consumed in Europe. As Spain’s Energy Transition Minister Teresa Ribera recently stated, this proportion is now less than 10%.
The global economic situation is pushing industrially developed countries – primarily EU countries, but also India – to look for alternative sources of oil. The situation is aggravated by the fact that in the short term, the US is concentrating its efforts on holding down domestic hydrocarbon prices and will not increase gas supplies to global markets until at least December 2022, and possibly later.