“Gassy, gassy Europe”, by IRINA SLAV
“It was a feat of extreme bravery and talent because for all the starkness of the warning, Krebber did not once name the commodity whose shortage became the reason that warning had to be issued: NG.”
Gassy, gassy Europe
NOV 25
∙
PAID
“At the beginning of this month, the German electricity supply reached its limits. In the evening hours of November 6th, the price of electricity rose extremely quickly and extremely sharply — to more than 800 euros per megawatt hour. This made it around ten times more expensive than usual. There was a brief outcry, but it didn’t last long. Yet the whole situation was more than just a warning shot.”
One of the top ten rules for good fiction writing is a compelling opening sentence and paragraph. The above is an excellent example of how to do that. Unfortunately, it’s not fiction.
The high-quality intro comes from a LinkedIn post by the chief executive of RWE, Markus Krebber, who three days ago issued a stark warning about the state of energy security in Europe’s biggest economy. It was a feat of extreme bravery and talent because for all the starkness of the warning, Krebber did not once name the commodity whose shortage became the reason that warning had to be issued: natural gas.
The most he dared say was “secure capacity” that has not been added at the pace it needed to be added at, in order to cover for intermittent wind and solar when they do not perform. Maybe he’ll mention gas in part three of the thriller series.
Europe’s relationship with natural gas has been problematic for three years now and it seems that the worst some of us have been predicting since 2022 is about to happen this winter — because it will be a normal winter with normal demand levels. Europe’s luck is running out, and fast. Exactly as we said, repeatedly.
EU countries are withdrawing 500 million cu m of natural gas from storage daily, an Azeri news publication reported last week, citing data from Gas Infrastructure Europe. The data must be well hidden because I couldn’t find it in the time I had allocated for trying to find it. However, the Wall Street Journal also reported that Europe is stepping up gas storage withdrawals. And it’s only the beginning of winter.
“The European Union’s gas storage is currently 89.4% full, below the five-year average of 91% for this time of year, with net withdrawals of more than 5.4 terawatt hours as of Wednesday,” the WSJ reported, also citing Gas Infastructure Europe. The publication also noted that gas prices in Europe have hit the highest this year and will probably go further up as temperatures drop.
Now, that WSJ report came out on November 22. A day later, Euronews, one of the EU’s official party-line publications, reported that “the necessary natural gas reserves appear to be supplied and secured at the moment.” The outlet went on to cite the president of something called the London College of Energy Economics — which is not really a college at all — a Dr. Yousef Alshammari, who said there’s nothing to worry about because storage was at 95%, which was an obvious lie.
“Today, gas storage stands at 95% full, well above 100 bcm [billion cubic metres],” Dr. Alshammari told Euronews. He deigned to acknowledge the potential for a problem, however, saying that “It looks like this winter they could go well below 50% which means that Europe will need to buy much more gas this next year to restore gas storage at nearly full levels.”
The reality of Europe’s reliance on natural gas has become something of a taboo in the media, although a temporary one. The approach to covering gas news in Europe has been along the lines of “Make it look like a good thing and only admit to the truth when it becomes impossible to conceal.”
Here’s a sample. US LNG export dominance tested as Europe's demand wilts, Reuters’ Gavin Maguire reported in September, praising the EU for its wind and solar buildout, which, according to him, led to a sharp drop in European demand for U.S. LNG over the first half of the year. So far so transitiony.
In early November, Maguire again reported that Trump-led oil & gas export boom may go bust in Europe trade spat, making the quite adorable suggestion that the EU might threaten Trump with not buying U.S. LNG to force him to not impose tariffs on European goods. Awkwardly, on exactly the same date, November 8, the AFP reported that EU Chief Suggested To Trump Buying US Gas Instead Of Russia's.
Thirteen days later, the mask went off, with Maguire reporting that US LNG exports primed to jump as price arb to Europe opens wide. Suddenly, Europe wants more U.S. LNG and not because Ursula von der Leyen said so. Suddenly, wind and solar cannot cover soaring demand for weather reasons — something that, to be fair, Maguire and other commentators do acknowledge. Suddenly, gas is life and light, and heat. And there’s nowhere near enough of it for Europe, not at affordable prices, at least.
Here you might be reminded about European politicians’ figurative dances of joy when the EU started buying U.S. LNG back in 2022. Russian dependence is over, they said. We’re free to buy gas from wherever we want, they said. The joy lasted a few months before the obvious became too obvious to hide: that “freedom” was costing the EU billions.
The not too covert suggestion that Russia was somehow holding a gun to Europe’s head and forcing it to buy its gas wilted and died. As Bloomberg’s Javier Blas spelled it out in that recent column I quoted last week, Europe used Russian gas because it was the cheapest. The end. I flatter myself with the fact that I said the exact same thing two years ago. One wonders what prevented Bloomberg columnists from doing the same. Or doesn’t.
But let’s return to Reuters and Gavin Maguire, who reported last Friday that “The price differential between U.S. Henry Hub natural gas futures - the U.S. gas price benchmark - and the TTF gas trading facility in The Netherlands has widened by over 30% from the current 2024 average for delivery during the coming winter.”
This sounds like quite a bump. It suggests quite a tight market for natural gas in Europe. And that market’s about to get tighter because fresh U.S. sanctions on Gazprombank will reduce the last remaining flows of Russian gas via the Ukraine ahead of the end-of-year expiry of the contract keeping those flows going. But that’s okay because U.S. exports of liquefied gas are set to increase, for a price, of course. And European buyers will pay that price to keep the lights and the heating on. Isn’t electrification a marvelous thing?
What’s not so marvelous is the fact that the Yay, renewables are killing gas demand! narrative is disintegrating right in front of the eyes of those who pushed it for years. Europe has not reduced its gas dependence, not in any meaningful or, dare I say, sustainable way. The celebrations of wind and solar have only served to mask the rather less palatable reality that baseload generation rules and will rule forever, no matter how many record-breaking wind and solar output reports Ember puts out.
Winter is here and gas is so back it’s probably giving some people in Brussels acid reflux and the runs simultaneously. U.S. LNG cargoes bound for Asia are already being diverted to Europe. If the EU ends winter with any gas in storage, it would be a miracle. In the meantime, European buyers will be paying whatever sellers ask for their gas, any gas.
“The energy crisis that Europeans feared two winters ago has not come to pass, thanks to a combination of unprecedented energy policy interventions, cuts in demand and good luck,” the FT wrote back in April in an article titled How Europe solved its Russian gas problem.
“But that does not mean Europe is in safe waters,” the FT continued. “The short-term response to the crisis may have created bigger problems for the bloc in the future, including a heavy reliance on historically volatile LNG markets with implications both for industrial competitiveness and the green transition.” Yes, that’s one big problem solved for sure.
What I can’t help wondering is whether the EU will be enforcing its brand new methane emissions regulation just to make its winter situation even more exciting than it already is. Further excitement would come from firing up coal power plants, which is a distinct possibility, according to that president of the London College of Energy Economics, whom Euronews interviewed. Yes, the European transition and gas wean-off was going swimmingly. Then the cold came. And the cold tends to make things clearer. Frigid weather causes tears. This winter, they won’t only be of the literal variety.
