EU Gas Demand Expected to Fall by More Than Russian Imports in 2023

SEATTLE (Oil Monster): Brussels has said it expects EU gas demand to fall by more than its total imports from Russia this year.

Gas-saving measures undertaken by the EU’s 27 member states are estimated to cut consumption in 2023 by 60 bcm compared with the bloc’s average use over the past five years, according to an internal European Commission document seen by the Financial Times.

This represents “more than the gas volumes we still foresee to import from Russia in 2023, both pipeline and [liquefied natural gas]”, the document said. It is also 8 bcm more than the bloc managed to save at the height of its energy crisis last year.

Kadri Simson, the EU’s energy commissioner, told a meeting of commissioners on Wednesday that the fall in demand was not “good luck” but the result of a series of emergency laws passed in 2022 in the wake of Russia’s full-scale invasion of Ukraine, according to speaking notes seen by the FT.

Among the laws was an agreement that EU countries would voluntarily reduce gas consumption by 15 per cent, a target that had been surpassed, according to the commission.

One EU official working on energy policy said that “the figures on the reduction are quite striking”, adding that this meant that “Russia has lost its gas leverage on Europe”.

Analysts pointed out, however, that the EU experienced a mild winter in 2022 and that high prices had resulted in energy-intensive industry scaling back production.

If the bloc does meet the commission’s expectations of reducing demand by 60 bcm, there could be a supply glut and a “big, big price drop”, Henning Gloystein, director of energy, climate and resources at Eurasia Group, warned.

In March, EU countries agreed to extend the 15 per cent demand reduction target for another year even though energy saving efforts have not been felt evenly across the bloc. A report published on Wednesday by the European Environmental Bureau found that only 14 of the 27 EU countries had introduced compulsory measures to cut energy consumption and five of these — Germany, France, Italy, Spain and Portugal — made up 60 per cent of the fall in demand.

“The most robust measures on gas savings have been implemented in countries that import large quantities of Russian gas such as Italy and Germany,” the report said.

Bulgaria, Latvia and Romania were the only member states not to have implemented any energy-saving laws, which could in part be due to already low gas demand in those countries, the report noted.

Russian imports previously made up about two-fifths of the bloc’s gas but have been steadily cut by Moscow in the run-up to and after last year’s invasion of Ukraine, in an attempt to raise prices and squeeze the EU’s energy supplies. Preliminary data from the commission shows that in March EU imports of Russian gas were 74 per cent lower than they were in March 2021, the document said.

Overall annual gas supplies from Russia fell from 150.2 bcm in 2021 to 74.4 bcm in 2022, while imports in 2023 have amounted to 10.8 bcm, according to the commission’s figures.

Simson said that the bloc’s gas reductions had resulted in the EU’s total monthly payments to Russia falling from €21.4bn in March 2022 to €2.7bn in March 2023. But efforts to completely end gas flows from Russia on routes where Moscow has already cut supplies foundered at the G7 summit this month after they were blocked by EU delegates.

Questions also remain over whether the EU can secure any additional gas supplies this year as most available LNG has already been contracted.

“There is only so much supply and a lot of it is already committed,” said one diplomat from a non-EU country. “It seems to be the case that the EU is asking for more than is feasibly possible.”

 Courtesy: www.ft.com