European Union energy ministers to spar over energy strategy

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The EU energy ministers will be on Tuesday morning to discuss how to avoid future repetitions of the gas-related energy price hike that is attacking the bloc.

It is a delicate time: Governments are struggling to fend off a popular backlash from weary consumers, to mitigate consequences such as rising food prices, to protect their climate agenda and to defend the existing liberalized energy market system against calls for radical structural changes.

It doesn’t help to ridicule Russian President Vladimir Putin that the European Commission made its own bed by bad energy policy – by rejecting long-term gas supply contracts in favor of a spot market to buy at will.

Some governments stand firm, hoping to see what they think is a passing phenomenon.

“We cannot support any measure that conflicts with the internal gas and electricity market, for example an ad hoc reform of the electricity wholesale market,” said a joint statement published on Monday by Austria, Germany, Denmark, Estonia, Finland and Ireland and Luxembourg, Latvia and the Netherlands. “This will not be a cure to mitigate the current rising energy prices associated with fossil fuel markets.”

Instead, the nine-country coalition advocates a faster introduction of renewable energies to wean the block from natural gas, more electricity connections between countries and more renovations so that buildings use less energy.

Meanwhile, countries like Spain want to rethink the way EU markets work, while Poland urges an investigation into whether Russia’s state-backed Gazprom broke rules by denying the EU additional gas on the spot market.

Kremlin rescue

Amos Hochstein, Senior Global Energy Security Adviser of the USA – charged with working out the conditions under which the Nord Stream 2 pipeline from Russia to Germany can be completed without US sanctions – said on monday that the current situation in Europe is an ongoing crisis that only Russia can solve by sending more gas through Ukraine.

“I rang the alarm bells a few weeks ago … that I was concerned that this crisis that we face if left unaddressed was not just about money and higher prices, it was literally something that was all Europe put lives at risk, ”Hochstein told reporters. “It wasn’t a surge that came back down to earth, it just stayed at these increased prices … and it reflects the fact that the markets are looking at these” [gas storage] Inventories in Europe are well below what they should be. “

Ira Joseph, Head of Global Generation Fuels and Electric Power Pricing at S&P Global Platts, said that the difference between historical gas storage levels in the EU over the past five years and this year’s lower fill is mainly due to Russian gas storage facilities, which are mainly in Germany lies far below normal.

“Russia is producing more gas than it has ever produced, but basically that’s what they decided to do Store gas in Russia instead of making more sense in their European storage this year, that’s the really big change, “said Joseph Europe this winter, there is no telling where the gas might go.”

EU Energy Commissioner Kadri Samson and Europe’s Association of Energy Regulators ACER have both said that Europe’s current gas reserves that filled About 77 percent are enough to survive a cold winter, but Hochstein countered that “in any scenario for an above-average colder winter there could be a resource crisis in Europe”.

LNG squeeze

Ministers will discuss joint gas purchases in the Energy Council and discuss whether countries should be required to hold gas reserves in the same way as they should in an emergency Oil stocks.

But with global demand outstripping supply, there is a risk that the EU will remain timeless on the dance floor looking for gasoline.

Joseph pointed out that Norway exported seven percent more gas last year, “the volume that went to Germany is now going to the UK instead”.

And while the US exports LNG, “more of it goes to Asia and also to Brazil because of the drought …”

While former US President Donald Trump spoke loudly about the signing of contracts to bring US liquefied natural gas producers into the EU market, Hochstein said: “The US government does not instruct our companies to whom to sell.”

To make matters worse is that Enagas data shows The booked gas flows to Spain via the Medgaz pipeline are currently at zero for November due to an ongoing tariff dispute between the transit country Morocco and the supplier Algeria – which can only be partially offset by higher direct flows from Algeria to Italy.

Meanwhile, Asian buyers are busy hiring suppliers for years to come.

“In the past few months, Chinese buyers have signed supply contracts for a total of 10 million tons of LNG from the US and Qatar, which is a sizeable amount, all starting in 2022 and 2023 and ranging from three-year contracts to 20-year contracts,” said Josef .

EU countries like Poland, Hungary and Italy still have gas supplies through long-term contracts with producers in the US, Qatar, Russia and Azerbaijan.

But there might still be room for others to jump into the game. “Qatar has a lot of long-term contracts that are expiring and is building capacity that has not yet been sold, so the EU would be a logical market for that,” said Joseph.

This article is part of POLITICS‘s Premium Policy Service: Pro Energy and Climate. From climate change, emission targets, alternative fuels and more, our specialist journalists will keep you up to date on the topics of the energy and climate policy agenda. E-mail [email protected] for a free trial.

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