March 29, 2023

EU extends gas demand reduction target for another year

EU member states agreed to continue cutting their gas demand by 15% compared to the five-year average until Mar. 31, 2024. The emergency legislation started applying in August 2022 to help the bloc refill its gas stocks and mitigate its unprecedented gas shortage following the Russian pipeline supply cuts.

Last July, EU energy member states agreed to voluntarily cut the gas consumption of EU member states by 15% between August 2022 and March 2023 compared to the five-year average for this period.

Based on a proposal from the European Commission, EU energy ministers representing their respective member states agreed on Mar. 28 to extend this target for another year until March 2024. EU energy commissioner Kadri Simson said at the press conference following the ministers’ meeting that this one-year extension “can save the bloc 60 bn m3 of gas by April 2024.”

Between August 2022 and January 2023, the bloc consumed approximately 174.8 bn m3, or 19% less than the five-year average of 217.3 bn m3, based on data from the European Commission and Eurostat. In order to meet the 15% reduction target over the August-March period as a whole, the bloc’s consumption needs to stay below 256.3 bn m3 for the entire period, i.e. no more than 81.5 bn m3 for February and March together.

The continued reduction of gas consumption by 15% is necessary to ensure that the EU can comply with its storage target of 90% which is imperative for the security of gas supply and for preventing any supply shortfall next winter, Swedish energy minister Ebba Busch said at the press conference following the ministers’ meeting. Sweden holds the rotating presidency of the Council of the EU, which is composed of the EU ministers, for the first half of the year.

EU member states agreed last year on mandatory refilling targets for their underground gas storage to optimise storage utilisation and help ensure the bloc’s security of supply during the winter. EU underground gas storage must be 90% full by Nov. 1, 2024.

The EU expects that with the current Russian pipeline gas import levels, it will only receive a maximum of 20 bn m3 of Russian pipeline supplies this year, if these unreliable imports are not disrupted altogether, compared to just over 60 bn m3 last year, as stated in the amended legislation on gas consumption cuts. Therefore, there is a serious risk that gas shortages occur in the Union during the forthcoming winter of 2023 to 2024, the legislation also says.

The risk is exacerbated by a possible rebound in Asian LNG demand which would reduce the availability of LNG on the global market, weather conditions such as more frequent heatwaves and droughts which reduce hydropower storage and nuclear production, low availability of existing nuclear production which increases demand for gas-fired power generation, and further possible gas supply disruptions, including a complete halt of gas imports from Russia. Asian LNG imports are set to reach 68.7 mt in the first quarter of the year, compared to 68.8 mt in the first quarter of 2022 and 74.6 mt in the first quarter of 2021, Kpler data show. Meanwhile, EU LNG imports are on track to reach 24.5 mt this quarter, compared to 21 mt in 2022 and 12.6 mt in 2021.

During their meeting on Mar. 28, the ministers also agreed on the reform of the EU Gas Directive and the EU Gas Regulation. The reform of these two legislations is widely referred to as the “Gas Package” and is meant to help the bloc transition away from fossil fuels to cleaner fuels such as biogas and hydrogen.

The ministers introduced in the Gas Package a security close for temporary limitations for imports from Belarus and Russia. “It is clear that we will not go back to the status quo with Russia as our main gas supplier. I, therefore, welcome the addition by the Council that gives member states the possibility to temporarily restrict capacities for gas including LNG from Russia and Belarus,” Simson said.

Following this agreement on the Gas Package, negotiations between the Council of the EU (ministers) and the European Parliament can now start.

The Council of the EU will soon start discussing the shape of the EU electricity market reform. This file “will be highly prioritised during the Swedish presidency,” Busch said.

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