The International Energy Agency has issued a warning that Beijing's actions over LNG might leave European Union supplies almost depleted.
During the next summer, Europe can see a severe shortage of natural gas on the order of 30 billion cubic meters. And China may be in a position to play a pivotal role in this potential new supply crisis for the Continent of the Old World. The International Energy Agency (IEA) published a paper with the provocative title "It is never too early to prepare for next winter: Europe's gas budget for 2023-24," which reveals this information.
The report verifies that the grip of the energy crisis will be less severe in the near future: gas storage sites in the EU are 95% full, which is 5% more than the average filling level over the past five years, prices are lower, and the fact that it is still relatively mild despite the fact that it is late autumn has reduced consumption for heating. However, the euphoria that has been sweeping the internet over the last few days should not lead to an underestimate of the dangers that lie ahead in the medium term, the IEA cautions. If the European Union has been successful in making up for the shortfall in supplies from Russia, it is due not only to the significant pipeline pumping from Norway, Algeria, or Azerbaijan, but also (if not more so) to the abundant arrival of liquefied natural gas in European terminals. This is what the EU owes its success to. The tripling of flows from the United States made the LNG boom a distinct possibility, and it should not be ignored. However, a significant portion of the credit should also go to China in a roundabout way.
As a matter of fact, Beijing has significantly decreased its weight in the import of LNG on a global scale in the first ten months of 2022. The International Energy Agency (IEA) highlights the fact that this was a "key factor for greater availability" of liquefied methane in Europe and "to compensate for the drop in gas deliveries from Russia." In other words, in a market that is often rigid, such as the gas market, the absence of a significant rival like China has provided the European Union with the opportunity to seize more stocks in a very short amount of time. On the other hand, the same thing may not take place in 2023.
First, there is a problem with global availability: the IEA report states that "the global supply of LNG is expected to increase by only 20 billion cubic meters in 2023, with about a third of the growth coming from the United States." This presents a problem because it limits the amount of growth that can be achieved. This growth is "about half the average increase documented for the period 2016-2019," according to the report. In other words, even with all of the efforts made by the United States or other partners that are regarded dependable by the EU, the global market for liquefied natural gas (LNG) will not be as prosperous as it would be in the case that supply from Russian pipelines are cut any more. And if China were to resume the practice of importing liquefied methane, as it had done up to the year 2021, then the situation would become rather complex for Europe: According to the IEA, in the year 2023, assuming Chinese imports of LNG recover to levels of ".
Insufficient for the EU to adequately handle the "expected decline in pipeline deliveries" that will occur in the following year. Even more so if the interruption were to be complete: under this scenario, the nations of Europe would be left with a deficit of 30 billion cubic meters. And as a direct result, with the gas reserves being around half empty. A threat that requires prompt action on the part of Europe. Because of this, Fatih Birol, the executive director of the IEA, strongly recommends that governments take "Increases in energy efficiency, the use of renewable energy sources and heat pumps, and other steps that will help decrease the demand for gas should be accelerated. This is very necessary for Europe's energy security, the health of its people and industry, and the continent's evolution toward the use of clean energy ".