International Energy Agency ‘sounds the alarm’ on gas supply next year, warning EU leaders not to become complacent over recent price slump and urging them to take action immediately to ensure supplies for next winter.
Fatih Birol, head of the IEA, said on Thursday that while Europe managed to fill storage sites to 95% before the winter months, the agency predicted a significant shortfall for next year, supplies Russians to remain largely cut off.
“The fact that this winter is not as difficult as we feared a few months ago does not justify complacency for next winter,” Birol said.
“There is an imminent risk. . . We expect gas markets to remain tight and volatile. This is a wake-up call for next winter as we believe we need to take immediate action now to avoid a shortage next year.
Birol said IEA analysis suggested that by this time next year storage facilities in Europe may only be 65% full given the difficulties of filling them from next spring. .
He said the IEA expected a supply shortfall of around 30 billion cubic meters because, unlike in 2022, Russian exports are expected to be close to zero from the start of the year. In 2022, Russian supplies were not too far below normal levels in the first six months of the year, before Moscow openly cut exports in June in retaliation for Western government support for Ukraine.
Birol said it could also be more difficult to ensure an adequate supply of liquefied natural products gas in 2023, which has been Europe’s main substitute for Russian exports.
China, the world’s largest LNG importer, is expected to show improved economic growth and may well reverse the roughly 20% drop in LNG imports seen this year, the IEA said.
LNG supply growth is expected to be around half the normal rate in 2023, which could leave Europe struggling to access enough cargo if Chinese demand rebounds, Birol said.
The IEA calls on European governments to take action now, including accelerating investment in energy conservation, renewables and home insulation plans, as well as switching to heat pumps to reduce gas demand.
The agency, which is largely funded by OECD members to advise on energy security, is due to release an updated 10-point plan for governments in the coming weeks.
“Europe will have a gap of around 30 billion m3 between supply and demand next summer – this is a serious challenge for European energy markets and the European economy,” Birol said. .
“We want to put this on the table and bring it to the attention of European leaders.”
Gas prices in Europe have fallen since hitting an all-time high above €300 per megawatt hour in August to around 130 MWh on Thursday. But this level remains well above the long-term average of €20 to €30.
Prices have fallen as storage sites have reached capacity and the mild autumn has delayed the start of the heating season, when gas demand is at its highest.
Birol said Europe could still suffer “bruises” this winter from high prices while the potential for shortages in certain geographies has not been eliminated.