The consequences of Russia’s invasion of Ukraine and Vladimir Putin’s gas game have caused profound unrest on a global scale. Energy blackmail, cutting off supplies to Europe, sanctions and embargoes created a situation in which it was necessary to immediately reshape the market. This, in turn, has led to unstable markets and a race against time to secure gas supplies.
The problem is that it is brutal The Gas Race turns into a ruthless relay race. The first stage is behind us, but it is already there We have to secure the reconstruction of the reserve before next season. This means a renewed increase in demand, a fight for more contracts and transportation insurance, and thus also an increase in prices.
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See also: The sanctions were aimed at reducing Russia’s revenues from gas and oil. Effect? “Irony”
“The rich will push the poor out”
The deepest crisis in decades has just begun. Europe is already bearing a huge cost. account billion dollars in energy costs writes bloomberg. The gas roller coaster is acceleratingAs Dr. Przymyslaw Zaleski, an expert from the Pulaski Foundation and Wrocław University of Technology, notes in an interview with money.pl. And the Turmoil in the gas market will accompany us for a few more years – he points out.
Natural gas has become a real conflict fuel in global markets, unfortunately with disastrous consequences for individual economies. Note that only the price of gas in 2022 was able to increase by up to 700 percent. – reminds Dr. Zaleski.
The two largest gas exporters benefit from this. Pushing Russia out of such an energy-intensive European market has become an opportunity for other suppliers. In just a few months, the market had changed drastically, and individual nations on the Old Continent had begun to compete for new contracts.
– The winner is definitely Qatar, which has already signed long-term contracts in Asia and Europe. The United States is also in a good positionbecause their prices have more than doubled, and the recent fire in Freeport has caused more panic in the markets and an increase in prices, notes the Pulaski Foundation expert.
The competition will intensify even more He who strongly believes in himself will gain an advantage. The rest will depend on gas from the volatile fund exchanges. for this reason By 2026, long-term LNG contracts will be completely sold out – Estimated by the Japanese Ministry of Economy, Trade and Industry (METI). Therefore, individual countries will enter into more expensive and longer contracts to secure the competitiveness of their economies.
So we are facing a battle of gas prices and countries The richer will drive the poor outWhich is really happening, because some countries love Dr. Zaleski notes that Pakistan and Thailand are already restricting their purchases because they can’t afford them.
This trend can also be seen in the business itself, if a chemical giant like BASF limits its production plans due to raw material prices.
The increase in EU LNG imports has been mainly at the expense of Asia – especially developing countries with unstable economies. According to the Institute for Energy Economics and Financial Analysis (IEEFA), international gas and petrochemical companies, such as Eni and Gunvor have defaulted on contracts to supply LNG to Pakistan at least 11 times since 2021. This led to gas rationing in this country and extraordinary supply bids.
As the IEEFA points out, paradoxically, then For poor countries, it is LNG that has gained a reputation as an unreliable and unstable source of energyFor extremely exorbitant prices and interrupted deliveries. In the first seven months of 2022, LNG imports to emerging Asian economies fell by more than 6%. on an annual basis.
Gas contracts expire
The energy crisis created by Russia in Europe at the end of 2021 and its extension on a global scale coincides with the invasion of Ukraine in February 2022. With another factor that will enhance competition in the liquefied gas market.
As explained to us by the prof. Ruszel in mid-September, We will really feel the effects in 2023. This is a key moment, because it will be now At the prices at which we will buy gas in the coming years.
The liquefied gas market is developing. The war in Ukraine has demonstrated that basing raw material supplies on a ready-made pipeline network, while cheaper, may prove illusory for energy security. in Europe Pipelines have become a tool for extortion. It can also become the target of diversion attacks and is vulnerable to failure (Whether it was real or just an excuse to stop deliveries.)
Therefore, more and more countries are expanding LNG gathering infrastructure, allowing flexible sourcing of raw materials from different suppliers. There are more gas stations not only in Europe. In 2019, according to gas infrastructure data in Europe, we had, on the Old Continent, 37 LNG terminals, 26 of which are located in the member states of the European Union.
But as many as 43 countries in the world have the infrastructure to receive it. However, this number is no longer valid. Suffice it to mention that Germany has just built its first floating station (the so-called FSRU), and plans to get more.
in a A Polish ship is under construction, to be built in Gdańsk Bay. At the beginning of last year, Croatia opened its first terminalAnd Portugal, for example, is expanding its receiving capacity. Russia is also intensifying investments in this field.
There is still no common market
European countries can negotiate better supply terms if they work together. The problem is that the common gas market initiative is still in its infancy, and although the framework has been in place for at least a decade, The national policies of successive member states have led to a situation where the market is fragmented, And the It is difficult to distribute gas efficiently across the European Union.
The European gas market, joint procurement and joint storage facilities, which Brussels is calling for, must rely on internal gas collectors. This currently works to a limited extent. Thanks to EU directives, EU countries are required to support each other internally by sending gas to each other if necessary.
Europe as a large entity can negotiate contracts for the entire group. Bring the gas to the border and distribute it as needed. Thanks to the common market, we will get synergy and scale. However, this requires agreements and infrastructure development. For example, Poland has a low capacity of cross-border networks. It’s only 10 percent. our needs – points out in an interview with money.pl Dr. Janusz Steinhoff, former Deputy Prime Minister and BCC expert on economics and energy.
Europe as a whole will be a more serious client with the potential to negotiate better deals than the individual nations of the community “played” individually. In response, other countries will be able to adapt the infrastructure for export (such a requirement for the construction of a gas station on the other coast was set by Canada in the gas negotiations with Germany).
– Of course, the creation of additional infrastructure will gradually stabilize this market and any information that large gas companies, such as Cheniere Energy, Exxon Mobil and Shell, publish about starting new investments in different parts of the world, will have a positive impact. This takes some time though. At least 3 to 5 years – concludes Dr. Zaleski.
Przemysław Ciszak, money.pl journalist
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