Europe, with record low gas reserves in the storage facilities, high resource prices, a "green transition'' and the fickleness of renewables, is sinking deeper into an energy crisis. The analysts do not exclude that the EU countries may be left completely without gas. Moreover, they believe that the current energy crisis will last for the next few years, Bloomberg reports.
Sebastian Bleschke, head of INES (the association of German gas and hydrogen storage system operators), stresses that currently underground gas storage facilities in Europe are only 56% full. This is the minimum figure since the start of accounting. According to him, if one excludes the increase of Russian exports, by the end of March the reserves in UGS facilities will drop to 15%, and this is under normal weather conditions.
Another dangerous factor, according to the experts, is the concentration of Russian troops near the Ukrainian border. Considering that a third of Russian gas flows to Europe via Ukraine, subject to a new invasion, there are no guarantees of transit prolongation. Jason Bordoff, director of the Center on Global Energy Policy at Columbia University, stresses that the energy crisis in the region ties the hands of Western countries and does not let them respond to Russian aggression.
"The ability of Europe and the U.S. to respond to a Russian invasion is constrained both by a desire not to exacerbate Europe’s energy crisis by sanctioning Russian energy exports and, more broadly, by the threat that Russia could retaliate to any confrontation by restricting gas flows into Europe, as Russia did in 2006 and 2009," he explains.
The traders prepare for the worst-case scenario. Gas prices have already increased by 40% over the past month. The analysts do not exclude that the crisis may last in the region until 2025.
Context. The price of the January futures on TTF on the ICE Futures exchange is at around 92.28 euros per 1 MWh or $1,108.4 per thousand cubic meters today.
According to the GTS Operator of Ukraine, 41.6 billion cubic meters of gas were transported via the Ukrainian territory to Europe last year, which is a quarter less than in 2020 (55.8 billion cubic meters). The volume of gas transported from Europe to Ukraine for the same period amounted to almost 2.6 billion cubic meters (one sixth from the volumes in 2020). Gas export, including re-export, amounted to 2.6 billion cubic meters.
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