Europe Faces Tougher Gas Crisis in 2023

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Europe will face a harsher gas crisis in the coming year than it suffered in 2022, according to the International Energy Agency (IEA).

The energy watchdog's latest report has outlined a series of practical measures designed to help the region reduce its dependency on Russian gas, including boosting energy efficiency, deploying renewables, installing heat pumps, promoting energy savings and increasing alternative gas supplies.

Russian supplies may have further to fall, the IEA warned. Total gas volumes delivered by pipeline from Russia to the European Union (EU) over the course of 2022 are set to be around 60 billion cubic meters (bcm)--far below normal due to the Russia-Ukraine conflict. The IEA claimed that Russian pipeline deliveries "are likely to be considerably lower in 2023 and could drop to zero, leaving an even larger hole in European and global gas supply." In addition, supplies of liquified natural gas (LNG) will be tight. If pipeline imports to the EU from Russia drop to zero in 2023 and Chinese LNG demand rebounds to 2021 levels, then the EU "faces a serious supply-demand gap opening up in 2023."

It added: "Measures already taken by EU governments on energy efficiency, renewables and heat pumps should help reduce the size of the potential gas supply-demand gap in 2023. However, the EU's potential gas supply-demand gap could reach 27 bcm in 2023 in a scenario in which gas deliveries from Russia drop to zero and China's LNG imports rebound to 2021 levels."

The EU will add an estimated 40 bcm of LNG import capacity by the end of 2023 but only around 20 bcm of additional LNG supply is expected to come onto the market over the course of the year. Chinese import demand was unusually low in 2022, and a recovery in 2023 will intensify competition for LNG cargoes. Industrial Info is tracking 138 active LNG projects in Europe with a combined investment value of almost US$12 billion. Subscribers to Industrial Info's Global Market Intelligence (GMI) Project Database can click here for the reports.

The IEA noted that Europe's ability to secure higher LNG imports in 2022 was enabled mostly by lower import demand from China. Europe's crisis has also been softened by "unseasonably mild temperatures at the beginning of winter" which may not last. The IEA estimates that the mild weather in Europe in autumn 2022 cut gas demand by more than 10 bcm but warned that "there is no guarantee that temperatures will be as forgiving for the remainder of the winter, or for 2023 as a whole."

"The EU has made significant progress in reducing reliance on Russian natural gas supplies, but it is not out of the danger zone yet," said IEA Executive Director Fatih Birol. "Many of the circumstances that allowed EU countries to fill their storage sites ahead of this winter may well not be repeated in 2023. The IEA's new analysis shows that a stronger push on energy efficiency, renewables, heat pumps and simple energy saving actions is vital to head off the risk of shortages and further vicious price spikes next year."

Speaking at the launch of the IEA's report "How to Avoid Gas Shortages in the European Union in 2023," European Commission President Ursula von der Leyen said: "We have managed to withstand Russia's energy blackmail. With our REPowerEU plan to reduce demand for Russian gas by two-thirds before the end of the year, with a mobilization of up to 300 billion euro (US$316.2 billion) of investments. The result of all this is that we are safe for this winter. So we are now turning our focus to preparing for 2023, and the next winter. For this, Europe needs to step up its efforts in several fields, from international outreach to joint purchasing of gas and scaling up and speeding up renewables, and reducing demand."

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).