At the beginning of the year, Russian gas exports to Europe could have beaten the record levels of two years ago. Despite the fact that Gazprom does not use all the contracted transit capacity through Ukraine, the company takes a lot of gas from its reserves in Europe. This is evidenced by the data of European platforms ENTSOG, GIE, and the Ukrainian GTS Operator. The cold weather in Europe, the outflow of LNG to Asia, and attractive prices play into Gazprom’s hands.
During the first ten days of 2021 the average daily export of Russian pipeline gas to Europe, not counting Turkey, was 410 million cubic meters. It is 20% more than at the beginning of the last year. Gazprom sends the largest volumes through Nord Stream – 167 million cubic meters. This is followed by Ukraine (123 million), Poland (about 98 million), and the European branch of the Turkish Stream (23 million).
The current transit of Russian exports is below the record levels of 2019. Back then, it reached 490 million cubic meters per day. Moreover, now Gazprom does not even choose all the contracted capacities of Ukrainian transit. The company supplies 123 million per day out of 152 million.
However, Gazprom takes a lot of its gas from European reserves. Thus, on the eve of this heating season, the company said it had accumulated 9 billion cubic meters in the EU. Gazprom stores its fuel, for example, in storage facilities such as Rehden, Jemgum, and Etzel in Germany and Haidach in Austria. The average daily withdrawal of gas from them now makes about 120 million cubic meters.
Thus, the real supply of Russian gas to European consumers may well exceed the indicators of the beginning of 2019, reaching half a billion cubic meters per day, excluding Turkey. Although they will not be included in the statistics of the current exports, as they were taken into account last year.
The colder winter in Europe and the LNG outflow to Asia, where spot gas prices reached $ 800 per 1,000 cubic meters, plays into Gazprom’s hands. According to the GIE data, in December – early January the LNG imports to the EU dropped by 44 percent to an average of 18mn cubic meters per day.
In addition, the gas prices in Gazprom’s long-term contracts are linked to the price of oil and are more attractive than in the hubs, where they exceed $250 per 1,000 cu. m. An indicator may be Spain, which is heavily dependent on LNG.
“Some parts of Spain have recorded very low temperatures, down to -34 degrees Celsius. Unlike many other European countries, this country relies heavily (over 40%) on LNG imports rather than pipeline gas, and the connection to other European gas markets is limited. As a result, if we talk about the prices with delivery the next day, the quotations of PVB (Spanish hub) are 2.5 times higher than the TTF (North-Western Europe)!” – Alexander Sobko, an energy expert, wrote on Facebook.
There is enough gas on the market, so when the rush of demand after the long-lasting cold weather in Asia subsides, the competition in the European market will intensify and prices will go down. The TTF exchange is already trading gas with deliveries in the second quarter at around $200 per thousand cubic meters.
In this situation, gas suppliers, including Gazprom, may be supported by more active pumping into European storage facilities, which begins in April-May. For at least two and a half months of the heating season, UGSF of EU countries has reduced their reserves twice as much as last year – by nearly 30 billion cubic meters, while the daily withdrawal reached nearly 1 billion cubic meters.
Meteorologists promise that it will get warmer in Europe this week, but frost will soon return to the continent, Bloomberg reported. Maxar Technologies Inc. predicts this winter will be the third most days when heating is needed in the past 40 years.