(Montel) European gas markets could face an excess of gas supply in the coming years amid an expected increase in production globally, lower demand and higher renewables output, experts told an industry event on Wednesday.
“In time, there will be a rebalancing,” said Jonathan Stern of the Oxford Institute for Energy Studies, who noted that a “resurgence” of Russian gas would greatly boost global supplies.
Stern said he expected Russian supply to start increasing by 2026 as it was laying pipes eastward to China. Even though little of that would head to Europe, due to sanctions and Russia’s halt in pipeline supplies via Germany after it invaded Ukraine last year, it would free up other gas flows for European consumption.
Meanwhile, gas demand has dropped amid conservation efforts from households and lower industrial usage. According to energy industry lobby group BDEW, gas consumption in the continent’s biggest gas consumer, Germany, fell 13% from 624bn KWh in 2021 to 543bn KWh in 2022. As of 19 October, consumption stood at 487bn KWh, it said.
In March, the EU agreed to extend an emergency target to cut its gas demand by 15% to safeguard supplies for winter.
Yesterday, Catherine MacGregor, CEO of French utility Engie, said she expected industrial gas demand to remain 10-20% below normal next year and in 2025.
“Doom loops”
Industry was expected to continue to need less gas, said Georg Zachmann of Brussels think tank Bruegel, either because it had grown more efficient or shut down due to last year’s skyrocketing gas prices amid the energy crisis.
“At some moment, we’ll get into these doom loops,” he said. “Demand gets less and less and then the infrastructure becomes more expensive and then gas essentially gets priced out by itself.”
That would have long-range effects, he said. “We lowered the demand curve structurally. There is a significant risk that we are going into a substantial, dramatic oversupply on the gas side.”
Long-term deals
That would leave traders with tough choices to make between the need to secure gas but not be oversupplied, said Gyorgy Domokos Vargha, CEO of Met International AG, a trading company.
There was an expected global additional supply of 250bcm of gas expected until the end of the decade, he said, but the argument remained for long-term contracts to protect against unforeseen price spikes.
The online event was one of a series of talks in preparation for the annual E-world energy industry event, set to take place on 20-22 February in the western German city of Essen.
Corrects published article to amend reference to 250bcm gas supply.
