The International Energy Agency [IEA] published a report yesterday saying asserting that Europe could face a deficit of as much as 30 billion cubic metres (bcm) of natural gas in 2023 if Russian supplies is stopped, and demand from China recovers.

The agency stated that gas storage sites in the European Union are now 95% full, but warned that the cushion provided by current storage levels as well as recent lower gas prices and mild temperatures should not lead to “overly optimistic” conclusions about what would happen in time.

“With the recent mild weather and lower gas prices, there is a danger of complacency creeping into the conversation around Europe’s gas supplies, but we are by no means out of the woods yet,” said the agency’s executive director, Fatih Birol.

“When we look at the latest trends and likely developments in global and European gas markets, we see that Europe is set to face an even sterner challenge next winter.”

Russia, world’s acclaimed second-largest energy exporter before the Ukraine war and the continent’s biggest natural gas supplier, was forced to cut down its exports in response to economic sanctions from G7 and the European Union

However, European natural gas prices have dropped in recent weeks, with the warm weather and higher-than-expected gas storage levels easing concerns over winter shortages.
Reports say European gas futures dropped as low as €93.35 ($91.32) per megawatt hour last week, the lowest since mid-June. EU gas storage benefited from “close to normal” Russian gas deliveries in the first half of 2022, the agency said.

Total pipeline supply from Russia to the EU in 2022 is likely to amount to about 60 bcm, but the Paris-based agency said it is “highly unlikely” that Russia will deliver the same amount of gas in the coming year.

“Russian deliveries to Europe could halt completely,” it said. Russia has threatened to completely shut off Europe’s energy supply if a proposed price cap by the Group 7 countries becomes real in December as proposed.

Energy markets are going to enter another phase of uncertainty once an EU ban on Russian crude comes into effect on December 5. Lower imports from China, the world’s largest liquefied natural gas importer, in the first 10 months of 2022 have been a key enabler of higher LNG availability in Europe, the agency said.

“If China’s LNG imports recover next year to their 2021 levels, this would capture over 85 per cent of the expected increase in global LNG supply,” it said. Global LNG supply is expected to increase by only 20 bcm in 2023, with about one third of the growth coming from the US.

Rystad Energy in its August report noted that as the global energy crisis deepens and countries scramble to secure reliable energy sources, investments in new LNG infrastructure are likely to surge, reaching $42billion annually in 2024. 

Major growth markets for gas, such as India and China, have meanwhile sharply reduced their LNG imports in 2022. Again current strains on gas supply have led to energy shortages in several parts of the developing world that rely on imported gas, notably Pakistan and Bangladesh.

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