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Gas shortages: Europe will have to face up to them in the coming years

Published on December 06, 2022 by Pierre Belhache - 4 mins reading time
SMALL BUSINESSES Companies Gas

According to a report by the think tank The Shift Project, commissioned by the French Ministry of Defence, Europe is likely to face major gas shortages in the coming years. Accelerating decarbonization and stepping up efforts in favor of energy sobriety are the two solutions recommended to cope with these supply difficulties.

Serious gas supply difficulties in the medium term

Although Europe has recently succeeded in replenishing its gas reserves, which now stand at 92% in the EU and almost 100% in France, the risk of shortages in the coming years remains very high.

As explained in The Shift Project think tank's report entitled " Gas: what risks for European Union supplies ", produced for the French Ministry of Defence's Directorate General for International Relations and Strategy (DGRIS), Russia has until now been the European Union's main gas supplier, accounting for around 40% of imports.

However, it is highly likely that Europe will have to cope with a lasting cessation of Russian gas imports, which cannot be offset by increased imports from Algeria or Norway.

Even if the picture were less gloomy, with demand for gas in Europe declining and contracts already signed between Russia and companies on the Old Continent remaining in place, major shortages would still be unavoidable. The supply deficit would be 13% by 2025, 25% by 2030 and 47% by 2035.

To arrive at these estimates, The Shift Project relied in particular on data from the independent Norwegian company Rystad Energy, which specializes in energy research and business intelligence.

Competition with Asian countries in the LNG market

According to Matthieu Auzanneau, Director of the Shift Project, the risk of a shortage this winter has only been averted by a drop in Chinese demand, which is in turmoil due to the resurgence of the Covid-19 epidemic. In the future, the situation on the liquefied natural gas (LNG) market could be less favorable for Europe, with very strong competition from Asian countries.

In the years to come, there is every reason to fear major tensions on a global scale, due to insufficient gas supply. Some countries had a foretaste of this this autumn, such as Bangladesh, which was unable to cope with the rise in prices caused by demand from the EU. As a result, a number of gas-fired power stations were forced to shut down, leaving 130 million people without electricity in October.

Competition is set to be all the more fierce as China's position on long-term contracts is far more advantageous than Europe's, with 100% of its demand covered by 2025, and 85% by 2030. The same applies to East Asia, where 95% of LNG needs are secured for 2025, and 78% for 2030. The EU must therefore fall back on short-term contracts, where prices are much less stable.

According to the think tank's report, to avoid facing serious gas shortages in the next few years, the European Union must redouble its efforts on two fronts: decarbonization and energy sobriety.