Europe and signs of overcoming the Russian gas crisis

Russia is the main gas exporter

Since the beginning of the Russian-Ukrainian war, and the alignment of the international community and European countries in particular with the Ukrainian side, a major crisis has emerged among most countries that depend on Russia to meet their energy needs, because Russian gas is the semi-main source of electricity generation and the energy needs of those countries.

European countries depend on Russian gas to varying degrees. Germany relies on Russia for 55% of its natural gas needs, while Italy relies on Russian gas for 40%. France covers about 25% of its needs through Russian gas.

Europe realized that modifying consumer behavior might be a quick solution to deal with the crisis temporarily, but in the long run the most successful policy for European countries is to quickly provide alternative sources of Russian gas, and that is what it worked to do.

And the Russian war caused a reduction in oil and gas supplies to the old continent in response to the economic sanctions that the United States of America and Europe sought to impose on Russia, as well as acts of sabotage that affected the two lines supplying Russian gas North Stream, that reduction, which in turn caused an increase in energy prices by 7%. In the living expenses of European families in 2022, with expectations of it reaching 9% in 2023 compared to 2021, according to a report published by the International Monetary Fund on expectations about the economic situation in Europe. The report also stated that the countries that will be most affected in Europe are Hungary, the Czech Republic and Slovakia. , while countries such as Germany and Italy will be able to deal with the crisis through rapid intervention policies.

The price ceiling and the increase in the crisis

The Europeans are aware of the seriousness of the current situation and the extent of the threat of this file to European national security, because energy supplies are the pillar of the economies of those countries. By imposing a price cap on Russian gas and oil, this may lead to the cessation of Russian supplies or Russia’s tendency to sell outside the countries in which the price cap was imposed, and this is precisely what Germany, the largest opposition to such intervention, fears.

Then came the agreement at the end of last December to set a price ceiling for Russian natural gas within a new package of economic sanctions that will come into force next February at 180 euros per megawatt-hour, which Moscow met by reducing more than its oil supplies. And gas to Europe, to become the European crisis more complex.

Mild winters and signs of solutions

Europe realized that modifying consumer behavior might be a quick solution to deal with the crisis temporarily, but in the long run the most successful policy for Europe is the speedy provision of alternative sources of Russian gas, so Europe worked quickly to provide alternative sources, and the crisis was greatly alleviated by the winter season. This year was mild and warmer on average than previous years.

An example of this is Germany, which does not have liquefied gas stations on its soil and was dependent on supplies through gas pipelines, unlike other European countries, and unlike the extensions that reach from the southern pipeline that carries Azerbaijani gas to Europe, it tended to build floating liquefied gas receiving stations where it opened Two stations until January 2023, and despite the high operational cost of such stations, which may reach 200 thousand euros per day, it plans to increase the number of its stations by four more during the current year, in order to receive liquefied gas from the immediate and long-term purchase deals that it concluded, The most important of which is the one signed with the State of Qatar to supply Germany with liquefied gas for a period of 15 years, starting in 2026, according to Bloomberg.

Despite this, in a report by the International Energy Agency that analyzed in detail the gas crisis in Europe and its expectations for 2023, it was considered that the current mild winter may not last, and that the measures taken by Europe to secure gas supplies may not meet all the needs during this year, in addition to the cost Allocated by the European Union to deal with a shortage of supplies amounting to 330 billion euros, at least an additional 100 billion euros are needed to overcome the crisis.

 Low natural gas prices and Russia heading east

Energy tariffs for consumers in Europe remain as high as they are and have not changed in anticipation of market volatility, but the wholesale price of natural gas in Europe has fallen to its lowest level since the beginning of the war in Ukraine, where the price of gas is now about 27 euros per megawatt hour, while In mid-December, it was 130 euros per megawatt-hour, and it was at its highest in mid-August, at 340 euros per megawatt-hour.

On the other hand, Russia also tended to increase its supplies of natural gas to China, India and the Central Asian republics through the "Power of Siberia 1" pipeline, which is not operating at its maximum capacity yet, and it is working on building a new line, "Power of Siberia 2". Which is expected to enter service in 2030 and reach China via Mongolia, bearing in mind that until last year China was importing its needs of natural gas mainly from Australia and Qatar secondly, which is something that will change in favor of Russian gas during the coming years, while India gets about 50% It needs gas from abroad, mainly from the Gulf countries.

New markets and perfect opportunities

Countries such as Qatar, Algeria and Nigeria may constitute the magic solution to this crisis in the coming years.

Although Qatar has sufficient reserves and the ability to play this role, it is committed to long-term supply contracts with East Asian countries, which prevents its ability to quickly intervene in the European market, which will open the way for the continent rich in energy resources to play a greater role in the arena. international.

Perhaps the biggest obstacle facing African producers is that despite the availability of reserves and resources, this sector needs large investments in developing technologies and logistics and building transportation lines and mechanisms for African gas to reach Europe, and African producers lack negotiating experience that requires them to work in a coordinated manner and not conclude deals. Individually, so that the positions of African energy producers are unified and work unified through a joint production agreement and joint interconnection to cover the shortfall and meet the needs of the global energy market.

Although there were preliminary talks and agreements in this regard, they have not yet entered into force, and the conditions were not conducive to such alliances as they are now. If this happens, it will be the perfect solution to the European energy crisis, and it will create new balances and new players in the global energy market. .