Never Too Early toPrepare for Next Winter:Europe’s Gas Balance for2023-2024

As winter approaches, a combination of favourable LNG market dynamics, robust pipeline deliveries from non-Russian suppliers, lower demand, and policy actions has given Europe a chance to sidestep some of the worst immediate impacts of Russia’s steep cuts to natural gas deliveries

Strong European demand for LNG led to a reconfiguration of global LNG flows as increases in LNG supply (23 bcm) were not sufficient to meet Europe’s rapidly rising LNG imports. Higher LNG flows towards Europe were enabled in part by China’s LNG imports falling by 20% (or 19 bcm) year-to-date as it drastically reduced spot procurements. Europe’s thirst for LNG also disrupted gas and electricity supply in more price-sensitive markets, including in South Asia.

below EUR 100/MWh (USD 30/MMBtu) by the end of October. This was less than one-third of the all-time high at the end of August but still more than five times the 5-year average during the 2016-20 period. Day-ahead prices – which are more reflective of short-term supply-demand factors – fell below USD 10/MMBtu at the end of October, while next-hour prices dropped into negative territory for a short period on 24 October amid infrastructure constraints in the TTF market zone.

The temporary comfort provided by today’s market conditions should not lead to overly optimistic conclusions about the future: a cold spell could quickly change sentiment and Europe’s gas balance faces even tougher tests in 2023.

Global LNG supply is expected to increase by 20 bcm in 2023, supported mainly by the ramp-up of the Calcasieu Pass LNG facility in the United States and the Coral South LNG facility in Mozambique, as well as the return of the Freeport LNG facility in the United States. However, this increased LNG supply will not be not sufficient to offset the likely decline in Russia’s pipeline deliveries to the European Union. Domestic gas production in the European Union is set to decline in 2023. In the Netherlands, production at the Groningen field was capped at 2.8 bcm for the 2022-23 Gas Year1, down from 4.5 bcm in the 2021-22 Gas Year. Production from small fields in the Netherlands also continues to decline. In Denmark, the restart of the Tyra field was postponed to the 2023-24 winter –meaning that it will not contribute to the refilling of gas storages during summer 2023. In the United Kingdom, gas production recovered strongly in 2022 and the potential for further short-term growth is limited.


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