The problem of electricity in Europe could, due to the gas crisis, last for years, until new ones are built nuclear power plants. Due to the green agenda, the European Union decommissioned nuclear and coal-fired power plants, and now due to the war with Iran and political relations with Russia, a power shortage is expected, energy expert Miloš Zdravković tells Biznis.rs.
"Europe is gasified, gas is used for heating, but also for industry, which is why gas consumption is high. The problem of gas supply has led to a decrease in industrial activity, as in the case of the company BASF, which is the heart of German industry and which reduced the volume of production by about 40 percent. BASF is the largest petrochemical complex in the world," Zdravković pointed out.
At first glance it seems that war in the Middle East, which erupted with the US and Israeli attack on Iran, is equally affecting the oil and natural gas markets. Attacks, missiles and problems in maritime traffic have disrupted the flow through the Strait of Hormuz, which is a key point for about a fifth of the world's energy supplies.
It is more difficult to make up for the lack of gas
And the gas market is much more sensitive and less flexible than the oil market.
"Italy, the Netherlands, Belgium and Great Britain directly depend on the import of energy from the Persian Gulf, and now Japan, India and South Korea, which are huge economies, are looking for an alternative in Russia and Australia. The largest gas field in the world was destroyed in Iran, Qatar's gas infrastructure was destroyed, so we are facing a long period of gas shortages," Zdravković explained.
According to him, an additional challenge is storage. Oil can be stored relatively easily in tanks or tankers, which helps cushion market shocks. Gas, on the other hand, has to be compressed or cooled in order to be stored, and then transferred back to the gaseous aggregate state, which is significantly more expensive and limited to certain capacities. Therefore, gas shortages are more difficult to compensate and have a longer-lasting effect.
Russia turned to the East.
At the same time, he points out, Russia has turned its gas export capacities to the east. Now, when the Russians diverted the gas from Western Siberia, which was supposed to supply Europe via the Nord Stream 1 and 2 gas pipelines, to China, signing the agreement on the construction of the Power of Siberia 2 gas pipeline, it means that this gas will no longer go to Europe, regardless of what the future European policy will be.
Moscow has signed a legally binding agreement with China, which means that the EU is left without 55 billion cubic meters of gas per year, Zdravković emphasized.
"There is no substitute for Russian gas, even if it doesn't exist at that price. The prices of imported liquefied natural gas from the USA are 2,4 times higher, due to the storage and transportation process. Another thing is whether there is any gas at all. The President of the European Commission, Ursula von der Leyen, announced that the EU will build nuclear power plants, but it takes time," Zdravković said.
More cubic meters will be required.
According to the latest Rabobank analysis, the European natural gas market is entering a completely new phase, as disruptions in the supply of liquefied natural gas (LPG) have abruptly ended a multi-year period of excess supply. This means that the entire structure of the market is changing, including how prices are formed, energy security and industry competitiveness across Europe.
A key change can be seen at the reference European gas hub TTF in the Netherlands, which now no longer reflects the surplus of gas as before, but the constant tightening of supply. Instead of stability, the market is characterized by greater pressures and uncertainty. Warehouses are filling up more slowly than before, the difference between winter and summer prices is growing, daily price fluctuations are more pronounced, and in some parts of Europe gas is more expensive than on the reference TTF market. On Tuesday, the price at the hub was around 550 euros for 1.000 cubic meters of gas.
Source: Biznis.rs
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