EU-27 gas overview: Is the energy crisis over for Europe?

Following a second consecutive mild winter, ongoing gas demand destruction and sufficient gas supplies from Norway and the international LNG market, the EU-27 is holding record amounts of gas in storage for the time of year, despite limited Russian pipeline gas flow. At the annual Flame conference held in Amsterdam on 23-25 April, a key topic was on everyone’s lips – “is the energy crisis over?”

Kpler’s natural gas and LNG insight manager Laura Page moderated the first panel discussion of the conference answering this very question. And the short answer was no, it’s not over yet. 

Whilst Europe has overcome the worst of Russia’s 2022 supply shock by importing substantially more LNG and destroying demand (helped by two consecutive mild winters), there are most certainly still risks on the horizon as the next winter heating season gets underway. Kpler Insight forecasts that EU-27 will start winter 2024-25 with underground gas stocks at full capacity for a second year running, giving the region a good buffer of supply going into the winter. However, the threat of a cold winter (both in Europe and Asia) looms, which could re-ignite competition for LNG cargoes between the regions, particularly considering limited liquefaction capacity growth this year. 

The panel discussion also identified the threat of Russian pipeline gas supplies via Ukraine ceasing at the end of this year. Kpler Insight has long forecasted that flows will drop from ~40 mcm/d to zero from 1 January 2025 as the five-year transit agreement between Russia and Ukraine comes to an end, removing around 14 bcm of gas supply each year. Andrii Prokofiev, head of The Division of Cooperation with Clients at the Gas TSO of Ukraine (GTSOU), revealed during the discussion that Ukraine will not be auctioning capacity on its pipelines due to the ending of, not only the transit agreement, but also the interconnection agreement. This leaves major EU offtakers in Austria, Italy, Slovakia and Hungary seeking to replace Russian molecules with additional LNG imports and non-Russian supply sources from 2025. Kpler Insight forecasts y/y growth in EU-27 LNG imports in 2025 as the region makes another pivot away from Russian gas.

Russian pipeline gas deliveries to EU-27 by route (bcm)

Source: AGSI+

Another risk to the outlook was rising European industrial gas demand, with some sectors such as fertilizers, petrochemicals and refineries increasing utilization or switching back to natural gas from alternative fuels amid recent reductions in TTF prices. However, the consensus view was that industrial gas demand remained fragile and dependent on the evolution of prices, economic activity and demand for end-use products. Certainly, a rebound in industrial gas demand back to pre-crisis levels was not on the horizon.

Barring any further supply shocks, a potential end point to the crisis is expected to come from 2026 as additional liquefaction capacity comes online and ramps up in the US, Canada and Qatar. LNG has been one factor enabling Europe to rebalance fundamentals since Russian pipeline gas supply faltered in 2022, and will provide additional stability in the years to come. 

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