Russia’s weaponisation of its gas exports to Europe was the dominant element on EU gas markets from July to September 2022, says the European Commission’s latest quarterly gas market report.
The report highlights how Russia continued to squeeze the European gas market by gradually turning down the gas volumes shipped via the Nord Stream 1 pipeline, implying a falling supply of Russian pipeline gas amid the height of the storage-refilling season. This propelled wholesale gas prices above 300 euros/megawatt-hours (MWh) by the end of August.
Russian pipeline gas imports from July to September were down by 74 per cent relative to the same period in 2021 (though Belarus by 96 per cent, via Nord Stream 1 by 85 per cent, through Ukraine by 63 per cent, only increasing via the Turk Stream, by 21 per cent), outlines the report.
The report recalls that Nord Stream 1 definitively terminated its operations in September as a result of sabotage. Provisional figures for January-November 2022 show Russian pipeline gas imports in the EU fell by 69 billion cubic metres (bcm) year-on-year – and even allowing for increased LNG imports, total gas imports from Russia fell by 64 bcm.
The report highlights, that in contrast with the dramatic fall in Russian supplies, EU LNG imports were up by a staggering 89 per cent in the third quarter – amounting to 32 bcm. In most of 2022, gas hub prices in Europe developed a premium compared to the Asian markets, giving strong incentives to send LNG cargoes to Europe. Much of this increase was due to higher volumes from the US. Indeed, provisional figures for January-November 2022 put the EU’s LNG imports from the US at 52 bcm, compared to 22 bcm in the whole of 2021.
In terms of demand, the report underlines that EU gas consumption in the third quarter fell by 8 per cent, (-5.1 bcm) year-on-year, amounting to 59 bcm. On the other hand, gas demand in electricity generation rose by 13 per cent (+15 TWh) compared to the same period in 2021.
Increasing gas prices led to a virtual collapse in demand in some energy-intensive industries. Overall, the report found that EU gas imports rose by 2 per cent in the same period, while production fell further by 9 per cent. The EU spent an estimated 101 billion euros on gas imports in the quarter – the highest in the last decade.
One important marker though, spurred on by new EU rules, the EU average gas storage filling rate reached 89 per cent by the end of September, some 14 percentage points higher than in 2021 on the same day. The impact of other emergency measures – such as gas demand reduction and the Market Correction Mechanism – are likely to be more apparent in the final quarter of 2022 and in 2023.
The report also notes that a number of new gas infrastructure projects came online in the course of the period. These include the gas interconnector between Greece and Bulgaria, the Polish-Slovak gas interconnector, the Baltic pipe, delivering gas from Norway, and a new floating LNG terminal in Eemshaven in the Netherlands. These new infrastructure projects will all contribute to the EU’s security of gas supply and to replacing Russian pipeline gas, well aligned with the objectives set out in the Repower EU Plan, says the report.