The price of gas in the EU has somewhat stabilized despite the ongoing hostilities in Ukraine. Yes, and the demand for gas is falling, experts say. But there is a new risk associated with the safety of Ukraine's gas transportation system. If it is damaged as a result of hostilities, European consumers will pay more for gas. But in fact, the European Union has nothing to replace Russian gas with - alternatives are either too expensive or too long to implement. The gas market in Europe on February 25 shows signs of stabilization. This is evidenced by trading at the TTF gas hub in the Netherlands. The day before, according to the results of trading, the price of contracts for March exceeded $1,650 per thousand cubic meters - an increase of +61.5%. The cost of futures overcame this bar for the first time since the New Year's peak values ​​on December 23 last year.

On Friday, gas prices fell by almost 29%. At 18.20 Moscow time, March purchases are traded at $1,145 per thousand cubic meters. Recessions and rises in prices are mainly explained by the aggravation of the geopolitical situation in Europe after the start of the Russian military operation in Ukraine. The volatility of the gas market is also fueled by sharp statements by European politicians.

French Economy and Finance Minister Bruno Le Mer demanded on Friday to discuss the gas issue as part of anti-Russian sanctions. “We intend to discuss the issue of gas with our European partners. This is the only economic issue of strategic importance,” the French official said.

Discussion of the gas topic, or as the minister clarified, "strengthening the energy independence of Europe", is planned at the next informal meeting of the EU finance ministers in Paris.

German Economy Minister Robert Habek also announced the diversification of gas supplies earlier on Thursday. “We will have to buy gas, as well as coal in other countries in a larger volume, because we cannot depend so much on a country that no longer respects international law,” said the German minister.

He also spoke about the Russian Nord Stream 2 project, which was put on the stop list due to the unfinished certification procedure. According to the minister, the launch of the gas pipeline is impossible in the short and medium term.

Habek said that Germany will refuse to purchase Russian energy resources.

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Last year, Germany imported 48.2 billion cubic meters, France - 11.5 billion. With such volumes of consumption, the cost of gas is very important. Germany bought Russian gas relatively inexpensively. The average annual export price of gas in Germany in 2021 was $205 per thousand cubic meters, while for Italy, France and Poland it was higher, on average $350, the expert specifies.

In other words, giving up Russian gas will cost Germany more than other EU countries. Moreover, the rejection of the Russian pipe, if it happens, will run counter to Germany's ambitions to create a gas hub on its territory,” says Zhuravlev.

Experts find it difficult to predict the cost of gas in the short term. “Guessing does not make sense, as the situation is changing very quickly. Prices are greatly influenced by the information background,” says Alexander Frolov, Deputy Director General of the National Energy Institute.

But experts do not see significant potential for price growth from current levels. “The EU economy can no longer withstand current prices, the margin of safety is almost exhausted. Demand for gas is falling. With a further rise in prices, demand will simply accelerate the fall,” says Frolov.

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Gas prices are fizzling out

Earlier, Deputy Chairman of the Russian Security Council Dmitry Medvedev did not rule out that gas prices could rise to €2,000. "Well. Welcome to the new world, where Europeans will soon pay 2,000 euros for a thousand cubic meters of gas!” Medvedev tweeted.

It is unlikely that such a forecast will come true, Zhuravlev believes. “But on the condition that everything is in order with the Russian gas pipelines, that Nord Stream 2 will be launched, and the Europeans will fill underground storage facilities with gas on time,” says Zhuravlev from the Institute of Energy and Finance.

But the sanctions rhetoric will directly affect the cost of Russian natural gas, Zhuravlev believes.

“Until the sanctions directly affected exports, the price fell below $1,300 per thousand cubic meters. Given the current state of affairs, without aggravating the situation in Ukraine, the price of gas can smoothly return to levels below $1,000,” the expert says.

“But besides this, the risk of damage to the gas transportation system of Ukraine as a result of hostilities has appeared on the market. Such an outcome is unlikely, but if it does, gas prices will rise sharply again, Zhuravlev warns.Back to news »

China will not succeed in stealing gas

Experts are skeptical about the possibility of replacing Russian gas with supplies from other countries.

“For 13 years we have been hearing the mantra of European politicians about an alternative to Russian gas. Every year they "get rid of dependence on Russian gas." But they can’t get rid of it in any way, one of the European politicians would ask their companies if they are going to refuse Russian gas,” says Frolov.

According to Zhuravlev, there are "emergency options" for the largest importers of Europe to replace Russian gas - primarily due to liquefied natural gas (LNG) from the United States.

“There is also a hypothetical possibility of an increase in domestic gas production in the EU, in Norway and in the Netherlands (Groningen). But the Groningen field is closed due to increased seismic risks, and Norway is introducing new fields only to maintain the current level of production,” says Zhuravlev.

Long-term alternatives to Russian gas may be Iran and Turkmenistan (construction of the Trans-Caspian gas pipeline). “But these projects will require billions of investments and a lot of time, more than one year. In addition, in the case of Iran, Europe will have a conflict of interest with the United States, and in the case of Turkmenistan, with China,” Zhuravlev clarifies.

According to experts, there is a possibility of importing LNG from Qatar and Australia, but most of the projects there are aimed at the growing market of China and the Asia-Pacific countries.

According to Zhuravlev's calculations, even a third of Russia's exports to Europe (about 50 billion m3) are practically impossible to replace in the near future.

Experts point to three scenarios for the development of events for Gazprom in the event that the EU refuses to put Nord Stream 2 into operation. The first is an appeal to European arbitration. The second is the conservation of the pipeline until "better times" and the dismantling of equipment.

“The third possible option is the sale of a controlling stake to European partners,” says Sergey Kondratiev, a senior expert at the Institute of Energy and Finance. But it is the sale of 51% of the monopolist's shares in the project that seems more likely, which will bring the Russian company about €5-6 billion.

bbabo.Net