Since the annual Flame conference held in Amsterdam in early May, as every year I have had the opportunity to attend, there have been some comments from participating executives that are of particular interest. It is common knowledge that the last 14-16 months have been some of the most difficult periods that the European energy market has experienced, mainly due to the severe impact on gas supplies, which led to particularly high prices, which are known to have peaked. in August 2022 (when TTF jumped to 345 EUR/MWh, compared to today, which is back to a more normal level of 25 to 30 EUR/MWh).

The recent complications in the European energy market have naturally raised a number of key questions and dilemmas regarding the future course of the gas industry. A common denominator of concern is the strategic role that natural gas is expected to play in terms of energy security over the next 20 to 30 years, as it is a key component of the energy mix in both electricity generation and general energy. consumption in most European countries. At the same time, the climate targets set by the Paris Agreement (2015) and defined by the EU must be met.

Industry representatives argue that natural gas, due to its very low emissions and landfillability (see CCUS technology), should be considered not only as a transitional fuel, but also as an essential one, since it can make a decisive contribution (covering base loads in electricity generation). and raw materials in industry) in the decarbonization of the energy system. In other words, with appropriate adaptation of the infrastructure, natural gas can continue to be used as the main fuel until 2050, while reducing its carbon footprint.

This can be achieved, on the one hand, by transporting hydrogen through gas networks, and, on the other hand, by increasing the use of LNG, since there are currently technical possibilities to significantly reduce emissions both in its production (i.e., liquefaction ), as well as during its transportation and gasification. By 2030, the LNG market is estimated to surpass the pipeline market. Global LNG production in 2022 is already up significantly compared to previous years (+600 bcm/y last year compared to 516 bcm/y in 2021), while already playing a key role in price formation in Europe and Asia. However, it still covers a relatively small percentage (estimated at 15%) of the total global gas trade.

Most industry leaders agree that there are currently four (4) factors affecting the European natural gas market.

Continued political pressure to further separate the European market from Russian gas with a goal of zero imports by 2027/2028.

The growing role of LNG, which in 2022 covered almost 45% of the total gas demand in Europe, compared to previous years, which is a question if it participated with 20%.

Demand for gas fell by 15% in 2022 and has little chance of recovering this year due to sluggish economic growth in the eurozone and an industry shift to alternative fuels.

In just 9 months, the European market switched from bulk Russian gas imports from Russia to offshore LNG imports from the US and other countries.

The ongoing efforts to decarbonize Europe’s energy system with a focus on renewables are based on the EU’s well-known over-ambitious goals.

Undoubtedly, the European gas market is currently facing a number of important choices. On the one hand, an almost violent transition in less than 9 months from mass imports of gas from Russia to seaborne imports of LNG from the United States and other countries, and on the other hand, its diversification through gas pipelines with the main supplier Norway and the increasing role of Azerbaijan and Algeria, create new conditions for deliveries to the European gas market.

A new reality has now formed in the European market, which, until 2022, covered almost 1/3 of its needs with Russian gas imports. Last year, gas imports from Russia decreased by 56% compared to 2021, and this year it will decline even more. Thus, European companies in 2022 imported from Russia a total of 64.5 billion cubic meters. m per year against 146.3 billion cubic meters. m in 2021 (through pipelines and LNG). According to the Oxford Institute for Energy Studies (OIES), in 2023, Russian gas imports to Europe should be 20% of the pre-crisis volume, a decrease much more than the Commission originally estimated.

It should be noted that the import of Russian gas to Europe (through Ukraine and the Turkish Stream) is still “flowing” under existing long-term contracts, since the EU has not, in practice, banned imports, as in the case of Russian oil and coal. Meanwhile, to fill the gap created by the sharp decline in Russian gas imports, European companies have almost doubled their LNG imports, from 88 billion cubic meters per year in 2021 to 154 billion cubic meters per year last year. As LNG becomes a strategic fuel for the European continent, where, thanks to recent expansion and infrastructure upgrades, it could provide most of Europe’s supply in the coming years.

Along with the redistribution of gas imports (pipelines vs. LNG), efforts are being made to generate domestic volumes by increasing biomethane production, with REPowerEU setting an ambitious cap of 35bcm. direct opposition to the equally absurd European targets of reducing agricultural production in the EU due to the perceived need to reduce methane emissions from crops and livestock.

At the same time, the wider EU plan is unfolding. to significantly reduce natural gas consumption by 2030 while increasing the use of hydrogen and biomethane. There is a clear problem here, as certain quarters are making systematic efforts to degrade and marginalize natural gas as a primary fuel. Thus, we again find a serious contradiction between what is dictated by national and European interests for an immediate increase in energy security by increasing gas production from fields found in the EU. (see North Sea, Black Sea, Eastern Mediterranean, etc.) and the dogmatism of climate change, which is directed against the strengthening of domestic industry, while encouraging all kinds of energy imports.

Finally, the recent activation of the platform for common gas supplies in Europe through the Aggregate EU mechanism and the completion of the first tender for the supply of 13.4 billion cubic meters. European level. This mechanism may eventually be able to cover a small percentage of the huge European gas market, but it is indicative of a new gas market structure that is gradually being created in Europe, which increases competition along with improved energy security.

Mr. Kostis Stambolis is the President of IENE.