EU Gas Obstacles from Geopolitical Risks and Russia Gas Transit

Rising geopolitical risks and the likely end of the Russia gas transit deal via Ukraine will add obstacles to the European natural gas market in 2024 and 2025 despite progress in countering the energy crisis in 2023 according to Energy Intelligence.

• European interest in natural gas may be longer than believed a year ago with firms showing interest in locking in volumes for over 10 years.
• Russian pipeline gas flows to Europe are expected to remain unchanged in 2024 ahead of the transit gas deal expiry at year end.
• Regulatory pressure on the EU’s Russian LNG imports is also growing with member states soon able to block Russian LNG access to European import terminal capacity and US sanctions potentially limiting Arctic LNG 2 shipments.
• European Commission are expected to extend the mandatory gas demand reduction quotas of 15% under the five-year average beyond March. The measure may be required with some indications of increasing gas consumption from colder weather and lower prices stimulating industrial demand.
• The EU pre winter storage target of 90% by Nov 1 can achieved with demand cuts of 10% from April and assuming a 15% cut until March 2024 is maintained according to ING.