Europe gas market -how it started how its going

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Thursday, 5:28 a.m. SMS from a journalist friend: "In the morning, Russia invaded Ukraine ...". I rub my eyes in the forest hotel and check the internet. Indeed, President Putin's speech, the order for a "special military operation", outbursts, fights in Ukraine, a Russian attack on military infrastructure ... At the end of the day, President Zelensky gives a tragic balance of the day: 137 Ukrainian soldiers died. Russia does not disclose its losses. Fortunately, there are only a few civilian casualties.

Later, a phone rang asking for an assessment of the situation. It is difficult to comment with such a deficit of information. However, today we can say one thing for sure: war, war, and the gas flows in an even wider stream.

On Thursday morning, Gazprom issued a statement that " gas normally flows through Ukraine and satisfies customer orders" . And it must be added: not only does it flow, but it flows in a much wider stream. Through the largest collection point - Veľké Kapušany, in Slovakia, gas transmission has almost doubled . On Wednesday, 35 million m3 (372 GWh) was sent there, and on Thursday, 60 million m3 (631 MWh) were sent. Apparently, customers in Europe wanted to increase their inventories for the end of winter. The demand for gas in Europe has dropped significantly due to high prices. In the third quarter of 2021, consumption decreased by 10% y / y. So Europe doesn't need too much gas.

But demand is in demand, and price games are going their way. In America, the gas war went unnoticed, with prices down by one percent on Thursday. What is different in Europe. This is where the money flowed in from the markets, which reacted to the conflict with price drops. The prices of European gas on TTF (Title Transfer Facility - Dutch gas hub), which have been rising for two days now, skyrocketed: from 89 to 124 EUR / MWh. But during the day the trend was down, the markets rated the risk as not big enough to break price records (EUR 167 as of December 21). On the Polish TGE exchange, which is a passive echo of European exchanges rather than the local exchange, prices jumped from 392 to (TGEgasDA) to PLN 561 / MWh - by 43%.

But Europe needs gas strategically and in the long term. It is necessary as a stable source that complements unstable, intermittent wind or solar sources. The entire EU energy transformation without gas will be in ruins. And this is the flagship program of Brussels, huge money was spent on it, the most powerful interest groups were involved.

So the gas has to flow. War, not war, it must . We know such situations from poor third world countries, where around fights, war, explosions, and well-guarded (and usually not attacked by combatants) wells quietly extract black gold.

The German Energiewende or the European "energy transformation" are, of course, renewable sources. It goes without saying that Europe does not have its own energy resources. Obvious. However, in today's climate convention - energy transformation means gas, gas and gas again. There is no other option to secure a stable energy supply. That is why Germany is investing in gas by shutting down the coal and nuclear energy sectors. This is an official government strategy, and the need for new gas capacity is estimated at between 20 and 30 thousand megawatts. This is as much as Poland currently has stable coal-fired energy capacities.

Therefore, the reaction of the West to the war in Ukraine is restrained in energy matters. Russia's financing has been hit, although it has not been cut off from SWIFT. America will not finance this "nuclear option." Why? President Biden made it clear: “The sanctions we have imposed on Russian banks have greater ramifications than the blocking of SWIFT. It always remains an option, but at present it is not a move that Europe would agree to. '

And energy resources? His economic security adviser, Daleep Singh, explained: “We consciously limited our sanctions to have an impact on the Russian economy, but also to minimize costs for the US and our allies. To be clear: our sanctions are not meant to cause any disruptions in the export of energy resources from Russia ”. I guess clear?

Looking a bit ahead, I believe that gas supplies from Russia will be a stable element of Europe's energy security. If the war in Ukraine ends with Russia's victory, gas transmission through this country may increase several times. From today's 40 billion a year to which Russia was committed to the more than 100 billion that was once sent. This actually equates to the new Nord Stream 2 pipeline. And, in fact, it is not needed today. But with billions of dollars of Western energy companies involved, today's hiatus of the regulatory procedure will simply take longer than it seemed before Thursday. I think maybe a year, and maybe three years. It was the same with the Nord Stream 1 pipeline, which also waited a long time and there were also conflicts, for example in Georgia. In my opinion, after the end of this war, the procedure will resume and will end with the gas flowing through NS2 at full steam, as Nord Stream 1 is already flowing today.

Although maybe… not in full swing. There will be a huge excess of transmission capacity. Huge. And since Europe does not need too much gas, our section of Yamal will be empty. Sorry, come back, we will use it to import Russian gas from Germany.

Andrzej Szczęśniak

PS God, take care of Ukraine.


photo: Moscow Times

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