(Montel) EU countries should extend efforts to reduce gas demand by 15% for a further six months to meet storage targets for next winter, think-tank Bruegel said in a new report released on Thursday.
An extension to October would be the minimum required for the bloc to meet its target to fill gas storage facilities to 90% of capacity by then, even with ongoing LNG arrivals and strong pipeline supplies from non-Russian origins, it said.
EU nations have voluntarily agreed to reduce their gas use by 15% versus the previous five-year average since 1 August last year, in a bid to build storage due to a curtailment of Russian flows amid the Ukraine war, though the obligation is set to end on 31 March.
“Tightrope walk”
Even if an extension was agreed, “Europe’s gas supply-demand balance will remain a tightrope walk for the next two years”, said the Brussels-based think tank.
If Russian gas exports to Europe via Ukraine and Turkey maintained current levels and the weather conditions were “typical” for the time of year, demand should be cut by 13% until the start of October to ensure security of supply, it added.
However, in the case of a halt to Ukrainian transit flows, a 17% cut would be required, while if there was a total stop of Russian supplies including through Turkey, demand would need to be reduced by around 20%.
Colder than normal weather conditions, meanwhile, could require demand cuts of between 20-26%, depending on the severity, to meet storage targets, said the report.
“The return of French nuclear output will therefore be a huge positive,” Bruegel added, with “hardly any gas saved in the power sector last year” due to record low nuclear and hydropower generation levels.
Only around half of France’s nuclear capacity was available last year due to prolonged maintenance outages, though levels have since improved with only 12 of 56 reactors currently offline.
LNG question
Meanwhile, to maintain record LNG imports, Europe would have to continue offering a price premium to other markets, said the report, with supplies in December having hit a record high and January’s volume the second highest.
“The EU was able to import so much LNG because it was willing to pay high prices.
“Whether Europe can continue to rely on these volumes depends on China’s fuel-switching ability and its economic growth,” said Bruegel.
EU nations have voluntarily agreed to reduce their gas use by 15% versus the previous five-year average since 1 August last year, in a bid to build storage due to a curtailment of Russian flows amid the Ukraine war, though the obligation is set to end on 31 March.
“Tightrope walk”
Even if an extension was agreed, “Europe’s gas supply-demand balance will remain a tightrope walk for the next two years”, said the Brussels-based think tank.
If Russian gas exports to Europe via Ukraine and Turkey maintained current levels and the weather conditions were “typical” for the time of year, demand should be cut by 13% until the start of October to ensure security of supply, it added.
However, in the case of a halt to Ukrainian transit flows, a 17% cut would be required, while if there was a total stop of Russian supplies including through Turkey, demand would need to be reduced by around 20%.
Colder than normal weather conditions, meanwhile, could require demand cuts of between 20-26%, depending on the severity, to meet storage targets, said the report.
“The return of French nuclear output will therefore be a huge positive,” Bruegel added, with “hardly any gas saved in the power sector last year” due to record low nuclear and hydropower generation levels.
Only around half of France’s nuclear capacity was available last year due to prolonged maintenance outages, though levels have since improved with only 12 of 56 reactors currently offline.
LNG question
Meanwhile, to maintain record LNG imports, Europe would have to continue offering a price premium to other markets, said the report, with supplies in December having hit a record high and January’s volume the second highest.
“The EU was able to import so much LNG because it was willing to pay high prices.
“Whether Europe can continue to rely on these volumes depends on China’s fuel-switching ability and its economic growth,” said Bruegel.
