Europe’s energy crisis will drag on for years

Europe’s energy crisis will continue for years unless the region can reduce demand and secure new gas supplies

Europe's energy crisis will drag on for years

“We are in a gas crisis and we will continue to be in a bit of a crisis mode for the next two or three years,” Sid Bambavale said. “So let’s not develop a false sense of security.”

At the end of September this year, Europe’s gas reserve level was around 90 per cent, broadly in line with the five-year average of 86 per cent, despite Russia largely cutting off gas supplies in recent months.

Next year, the amount of Russian pipeline gas supplied to Europe will fall to negligible levels.

Average European gas prices in 2023 will be €108 per megawatt hour, more than four times the average of the previous decade.

“High prices will have to squeeze demand basically every month next summer. It’s not a good thing – it’s an absolutely terrible thing for European business, and it’s the genesis of a recession,” Russell Hardy.

“The problems with replenishing storage in the summer of 2023 will be heavily influenced by their use in the winter of 2022-23,” Di Mattia said. “Continued declining demand and high LNG inflows are key factors in balancing supply and demand throughout 2023.”

Business consultant FTI Consulting calculates that if the EU were to replace all Russian gas with LNG, Europe would face a shortfall in regasification capacity – the facilities needed to turn LNG back into gas – of 40 bcm/year, which could rise to 60 bcm/year in a cold winter.

Countries such as Germany, the Netherlands, Italy, France and Croatia are pushing to build new regasification terminals.

According to Emmanuel Grand, senior managing director of FTI Consulting, there could be 40 bcm per year of import capacity in Europe by October 2023. However, he warned, “some of the projects are not backed by firm LNG commitments and there is a risk that these projects could be delayed”.

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