Europe could face a deficit of as much as 30 billion cubic metres (bcm) of natural gas in 2023 if Russian supplies come to a halt and demand from China recovers, said the International Energy Agency in a report on Thursday.
Gas storage sites in the European Union are now 95 per cent full, but 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 the future, the agency said.
“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.”
Europe is experiencing its worst energy crisis in history after Russia, the world's second-largest energy exporter before the Ukraine war and the continent's biggest natural gas supplier, reduced its exports in response to the EU’s wide-ranging economic sanctions.
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.
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 it is “highly unlikely” that Russia will deliver the same amount of gas in the coming year, the Paris-based agency said.
“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 of Seven countries, known as the G7, is enacted in December.
Energy markets are going to enter another phase of uncertainty once an EU ban on Russian crude comes into effect on December 5. A ban on Russian oil products will commence on February 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.
As the global energy crisis deepens and countries scramble to secure reliable energy sources, investments in new LNG infrastructure are likely to surge, reaching $42 billion annually in 2024, Rystad Energy said in an August report.
The 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. Major growth markets for gas, such as India and China, have meanwhile sharply reduced their LNG imports in 2022.