The energy crisis for the EU is not yet over, but for the future the more complicated situation seems to be that of Russia and the Gazprom company.
Just a few months ago the energy crisis seemed to have a clear loser and a possible winner. On the one hand the EU was in difficulty, ready for very harsh rationing in view of the winter and with gas at exorbitant prices. On the other, Russia - and in particular Gazprom - which had managed to increase revenue and were expecting a winter of further increases and record prices.
Instead, things turned out differently. And only a few months later the trend completely reversed. Of course, the EU cannot yet say it is out of the energy crisis and the fear of a rise in the price of gas or rationing in the coming years is not entirely excluded. But certainly now the situation is better than at the end of the summer.
While for Gazprom things are much worse. The price of gas has collapsed, Russian supplies seem to no longer be indispensable (partly for LNG, partly due to the reduction of consumption) and also the other markets do not favor Moscow as much as perhaps President Vladimir Putin hoped.
Gazprom’s situation
Gazprom is certainly starting from a favorable situation, from an economic point of view, thanks to the increases of the past few months. In the first half of 2022, before the record gas price, net profits were over 41 billion euros, against the 29 recorded for the whole of 2021.
But, as the Italian Il Sole 24 Ore explains, now everything has changed. Previously, Gazprom obtained around 70% of its revenues from the European market, but the situation has now completely changed. Moscow did not think that such a radical change was possible in such a short time, indeed it believed that gas was a much longer-term economic guarantee.
Russian flows and gas production
Exports outside the CIS area (former Soviet countries) to Russia are plummeted by 46%. The decline concerned almost the entire EU, also because sales in China increased, albeit slightly. And now Moscow is betting on China, hoping for an increase of over 15% in flows this year. But that’s all to see.
Russia is betting on new fields to increase exports to China, but the construction of two gas pipelines is also needed. The times, therefore, can only be very long: we are talking about years and years. In Europe pipeline flows have been reduced to less than 64 million cubic meters per day: 22% compared to December, when levels were already very low. A year ago the figure was six times higher.
The most concrete example is that of Germany, which from a country most dependent on Russian gas has gone on to almost completely give up Russian flows, especially after the stop at Nord Stream. And betting everything on LNG. But also for Italy the situation is similar, so much so that now less than 10% of imports come from Moscow.
Then there is the matter of gas production. On this front too, Gazprom had to opt for a reduction. In 2022, production was one fifth less than in 2021. And in 2023 it could be even worse, according to forecasts.
Gas, what’s happening now in the EU
The situation in the EU, meanwhile, has completely changed. Thanks to the mild winter temperatures and the reduction in consumption, but also to the fact that there is no competition from LNG. And now the gas price has also changed, by now reaching below 60 euros per megawatt hour, as at the end of 2021. This does not mean that the problems for the EU are over. And we must also consider all the expenses made so far for high energy costs (let’s think of aid for bills) and record inflation. But surely today the situation is better than a few months ago.
Why Gazprom is defeated
The situation for Gazprom is not the most optimistic. New projects seem a long way off and even those involving liquefied natural gas are being pursued with little conviction. Also because between the sanctions and the money that Moscow takes from the company to raise cash, every operation is inevitably slowed down.
The main problem, however, concerns the future. And it is explained by Jonathan Stern, senior research fellow at the Oxford Institute for Energy Studies (Oies): "In the short term, nothing will be able to compensate for the loss of 140-150 billion cubic metres of exports to the EU". In the end, the EU seems to be able to give up on Russian gas, but Gazprom can hardly give up on the EU.
Original article published on Money.it Italy 2023-01-18 17:50:11. Original title: Gas, perché alla fine a rimetterci è stata la Russia
