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This winter, Europe was going towards an inescapable scenario, but there is a lot of evidence that people are doing the right thing and decreasing their energy use, said Ben Luckock, Trafigura's co-head of oil trading. He went on to say that while we may avert a calamity this winter, they are more concerned about the winter after that. If the Russian issue remains as it is, it does not appear that it will be resolved, he continued.
A 25%-30% reduction in industrial demand, along with solid inventories and a steady flow of liquefied natural gas (LNG), will most likely help Europe get through winter, but the next cold season will require massive amounts of gas to fill storage, given the massive reduction and the potential halt of Russian gas flows to the continent. At the same energy conference, the CEOs of energy dealers Vitol and Gunvor expressed similar concerns, predicting that gas prices will remain high since Europe's present LNG infrastructure will be unable to replace lost Russian volumes. Russia, which supplied over 40% of Europe's gas demand last year, currently supplies less than 10%.
Analysts believe that in order to phase out Russian gas, Europe would need to acquire about 200 million tonnes of LNG over the next decade. Germany, Europe's largest importer of Russian gas, would require around 40 million tonnes of LNG to replace the 50 billion cubic meters (bcm) of pipeline gas it previously received from Moscow.
Movement of natural gas price in the last five years. (Source: Trading Economics)
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