Europe faces potential natural gas supply shortages this winter

Gas stocks are at the lowest levels in a decade
Amur gas processing plant facilities under construction in the background, part of Gazprom's Power Of Siberia project.

PHOTO/REUTERS  -   Amur gas processing plant facilities under construction in the background, part of Gazprom's Power Of Siberia project

Europe, which is in the process of securing gas reserves in its national infrastructures to meet demand in the coming months, could face a difficult winter in terms of gas supply. The situation is similar in other areas of the world. This circumstance is compounded by the evolution of prices: gas is at a 2021 high on international markets, as shown by the price of the Henry Hub benchmark.

A series of factors add up to this result, according to experts. One of them is Europe's heavy dependence on Russian gas. While an improvement in the amount of gas reaching the countries of central and eastern Europe will come from the entry into operation of the Nord Stream pipeline linking Russia and Germany.

This powerful infrastructure, which the United States has opposed because it increases the power of Russian President Vladimir Putin, has more than one aspect, the most relevant now being that it brings more Siberian gas to Europe.

El presidente ruso Vladimir Putin y la canciller alemana Angela Merkel en una conferencia de prensa conjunta en el Kremlin en Moscú, Rusia, 11 de enero de 2020
REUTERS/PAVEL GOLOVKIN - Russian President Vladimir Putin and German Chancellor Angela Merkel at a joint news conference at the Kremlin in Moscow, Russia, January 11, 2020.

Gazprom, the managing company, has stated that gas will flow on this highway this year, but the volume is not yet assured. However, the other side of the coin is that it increases Europe's energy dependence on Russia.

In this context, Citigroup analysts point out that natural gas stocks are at their lowest levels in recent years, an undesirable situation, especially with the coldest months approaching.

Europe needs to improve its reserves, the experts stress, but they also highlight other keys to ensuring this complex objective. The importance of gas pipelines has been boosted by the movements of gas tankers. Part of these cargoes are diverted to Asian countries, such as Japan and China, which are willing to pay more money, and in a context of a rising market. Nothing new in the gas trade, but everything is now more tense.

El logotipo del proyecto de gasoducto Nord Stream 2 se ve en un tubo en la planta de laminación de tubos de Cheliábinsk, Rusia
REUTERS/MAXIM SHEMETOV - The logo of the Nord Stream 2 gas pipeline project is seen on a pipe at the pipe rolling plant in Chelyabinsk, Russia.

In Europe, there are also other problems such as the decline of the Groningen gas field in the Netherlands. Meanwhile, Spain is facing the possible interruption of gas supplies from the historic Maghreb gas pipeline, which has linked Algeria to Spain, via Morocco, for the past 25 years, due to the breakdown in relations between the two Maghreb countries. Algeria has secured its commitments with Spain, but it is not clear that the capacity of the more modern Medgaz pipeline (Oran-Almeria) will allow it to transport all the gas arriving through the former network in addition to the quantity already arriving through it.