Europe Needs to Make Every Gas Molecule Count

Europe Needs to Make Every Gas Molecule Count
European countries need to make every molecule of gas count in the coming weeks, according to Rystad Energy.

European countries need to make every molecule of gas count in the coming weeks as potential decreases in flows and maintenance of critical infrastructure will only heighten the supply shortage, Rystad Energy analyst Lu Ming Pang said in a market note sent to Rigzone.

In the note, Pang stated that disruption over the past couple of weeks for the European gas market has dragged on, adding that the Nord Stream 1 facility continued to export about 60 million cubic meters per day of gas over the weekend of June 25 and 26.

“This has been a marked reduction from the levels of 150 million cubic meters per day before the Nord Stream 1 pipeline reportedly experienced compressor issues, forcing Russian state-controlled operator Gazprom to stop operations at one of the three compressor units, bringing down the effective pipeline capacity,” Pang said in the note.

“Impending annual maintenance for Nord Stream 1 from July 11 to 21 remains on the cards, which would reduce Russian gas supply - already down 40 percent - to zero for some time, with no guarantee of a start-up date,” Pang added in the note.

“Such a move would have significant implications for the European and global market and push prices even higher,” Pang continued.

The Rystad analyst noted that Europe can remain upbeat that Norwegian gas supplies continue to hold steady at 300 million cubic meters per day but warned that this may still not be sufficient as storage inventory levels rose by only 8.2 terawatt-hours in the previous week, “bringing the European gas storage level up to about 51.2 percent”.

“This is a far cry from the average of about 43 terawatt-hours of weekly storage injections for the past two months. An 80 percent storage level target by November would be out of sight if this injection rate continues,” Pang said in the note.

“Germany has, as a consequence, declared an ‘alarm phase’ second stage of its emergency gas plan, aimed at managing supplies and supporting its storage requirement of 90 percent by December. Phase 2 involves Germany restarting old coal-fired plants, as well as introducing incentives - such as a credit line of €15 billion ($15.86 billion) - that rely on market fundamentals to cushion the loss in gas supply,” Pang added.

“Austria and the Netherlands are setting out plans to rely more on coal-powered plants, while France and Italy are likely to follow suit in the coming days, aided by a slew of measures to manage gas consumption and storage,” Pang went on to say.

In a separate market note sent to Rigzone on June 23, Rystad’s senior vice president, Carlos Torres Diaz, highlighted that European power prices had jumped as a result of lower gas supplies and renewed concerns for the winter balance.

“Spot power prices have increased in tandem with European gas prices as supply disruptions are creating a tighter European balance,” Diaz said in the market note.

In a market note sent to Rigzone sent to Rigzone on June 22, Rystad analyst Zongqiang Luo outlined that Europe was looking to coal as Russia curbed gas supplies.

To contact the author, email andreas.exarheas@rigzone.com


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