Interview: What a changing gas market could mean for Europe this winter 

Against this rapidly changing gas landscape, how are you making sense of the shifts we’ve seen this year?  

You can’t help but compare this moment to 2022. In 2022, the energy crisis was most severe for the gas market, when we saw the sudden withdrawal of most Russian gas supplies from the region. This time, it’s a multi-commodity crisis. One of the differences I’ve noticed is that my colleagues covering other markets, whether oil or fertilisers, are also experiencing huge upheaval. When we’re seeing crises across multiple markets at the same time, the picture becomes even more complex.   

How is the winter likely to play out in your opinion?  

 The Strait of Hormuz has been practically closed since March. Qatar and the UAE together usually account for about 20% of global LNG supply. That supply has effectively been removed from the market. On the other hand, we’ve had increases in North American LNG export capacity. That cushions the impact somewhat, but not enough. There has been enormous uncertainty about when things will return to normal in the Gulf.   

  And we have two almost incompatible scenarios for how winter could play out. If we do get the Strait of Hormuz reopening and a return to relatively normal Qatari LNG supplies, then the global LNG market could quickly tip back into year-on-year supply growth. And Europe’s particularly low underground gas stocks might be manageable. If it doesn’t, then we’re in a very different situation. Across the EU, underground gas stocks are at least at a 15-year low in terms of the percentage filled for this time of year. The last time stocks were  close to this low across the EU was in 2021, just before the last major energy crisis.  If LNG traffic through the Strait of Hormuz is essentially absent for the whole winter, then it would certainly be the most challenging winter Europe has faced since 2022. And gas prices have been moving higher. Europe is running out of time to build its gas reserves, while expectations of the Strait reopening are being pushed further and further into the future. This is a worrying picture.  

And when you look at Energy Community dynamics?   

When you look at the dynamics within particular regions and countries, the picture is much more differentiated. In some markets, we’ve had a bigger buildup of gas stocks than in others. That’s true of Northwest Europe, but it’s also true of Eastern Europe and the Energy Community countries.  Poland is particularly well stocked. Ukraine has, as you said, indicated that it has stocked up for what it needs for the winter.  Of course, with Ukraine, there is massive uncertainty about the ongoing impact of the war on supply and demand — on gas production, industrial demand, household demand and demand in the power sector. That adds a whole other level of uncertainty for that particular market.  

On top of that, the role of Russian gas and what happens to those supplies remains a big question mark hanging over the market. The EU is planning to fully phase out Russian pipeline gas and LNG by autumn next year. The EU countries in the region that are still receiving Russian gas must source alternative supply. For the non-EU member states that depend on the transit of Russian gas through EU member states, there is also a significant level of uncertainty. So, once you look at the Energy Community region, there are additional factors of uncertainty at play.  

What could change if the EU and Energy Community move towards closer integration of their gas markets?   

  One of the factors that played a big role in the 2022 energy crisis, and continues to do so, is how efficiently we can get gas to where it needs to go within the European gas market — and how close we are to the EU’s vision of having a single, integrated market.   

  In 2022, one of the key reasons prices spiked so dramatically was that Europe didn’t have enough LNG import infrastructure to bring in sufficient cargoes to replace the lost Russian gas. But there were also bottlenecks within the European gas grids that made it difficult to get LNG from, say, a port in the Netherlands to Eastern Europe. Similarly, if you had a surplus of gas in Romania during the summer, for example, it wasn’t always possible to send that gas to where it was needed.  

  The more efficient the markets are, the fewer restrictions there are on where gas can flow — whether those restrictions are physical bottlenecks in the infrastructure or trading bottlenecks that make it difficult for market participants to enter a particular market. When you remove those restrictions, you ultimately bring down the price of gas for the region as a whole. The more integration we have, the lower the price should ultimately be for consumers.   

Integration is also important in terms of storage. Some countries have much more storage capacity relative to demand than others. Austria, for example, needs to import gas during the summer to fill its storage, and that gas can then flow to other markets in winter when they need it. The UK is another good example: it has relatively little storage, but because it is so well interconnected with continental Europe, gas can flow out to the EU in summer and back to the UK during periods of peak winter demand. That interdependence exists across Europe, and it shows why a nationalistic approach to gas does not ultimately serve any individual market. At different times, gas needs to flow in different directions. An integrated market gives us the flexibility and security to do that.  

In this context, what difference could more competitive tariffs along the Trans-Balkan Pipeline make?  

 The Trans-Balkan Pipeline has generally been used to get gas into Ukraine when Ukraine has needed it most and has been looking to diversify its supply routes. Having prepared for this winter by meeting its storage target, there might not be that much interest in using it this winter. Even so, a lot of this comes down to optionality.   

 One of the challenges since the 2022 energy crisis has been the huge reconfiguration of gas flows. This makes it really difficult to predict from one year to the next when a particular interconnection point or pipeline will become crucial. One year, Ukraine might really need to bring gas into the market through different routes. The next year, there could be demand and an economic incentive for gas to flow in the other direction — from Ukraine to the EU. Having all those options available, allowing gas flows to switch direction and gas to move from particular suppliers to new customers, will be beneficial when the moment comes. Certainly at a time when we’re looking at a particularly difficult winter for Europe as a whole, the more open the connections are to get gas where it needs to go, the better.  

Why is it important for you to come to the Gas Forum?   

 I went for the first time last year, and what really struck me was that it gave me an opportunity to speak to people in the market whom I wouldn’t necessarily meet at other gas conferences. You have representatives from across the Energy Community who might not otherwise be present at these events, from the Balkan countries through to Ukraine. I found it fascinating to hear their perspectives, and I was particularly struck by how open the discussions were. People from different countries were talking about very similar challenges and, importantly, about how they could overcome them. For me, there are also interesting parallels between the markets I know well in Northwest Europe and those in Central and Southeast Europe. In Northwest Europe, for example, the phase-out of Russian gas is largely complete, whereas for some countries in Southeast Europe that process is still ongoing. While there are significant differences between these markets, there are also similarities and lessons to be learned — particularly around how different markets have approached liberalisation.