EU on track to meet joint gas purchase target for this year

_{The European Union is on track to jointly buy around 10 bn m3 of gas this year, or roughly three-quarters of its mandatory target. The bloc agreed to start joint gas and LNG purchases in April to help ensure stocks are refilled ahead of next winter when supply is expected to remain tight. The EU is also contemplating expanding its voluntary 15% cut in demand until next year as another measure to tackle the current energy crisis.}

The bloc must jointly buy around 13 bn m3 of gas this year as part of measures meant to ensure the union’s security of supply next winter. As of last week, 22 EU member states had indicated an aggregated demand for around 10 bn m3 or 77% of the target. Once the five remaining member states indicate their demand, the total aggregated demand is expected to reach around 23-24 bn m3 of gas to be tendered on a dedicated online platform over 2023-2025. This volume includes demand from Ukraine, Moldova, and Serbia which are allowed to participate in this demand aggregation mechanism.

The dedicated platform allowing EU member states to aggregate their gas and LNG demand and make joint purchases will be launched in the coming days. The platform will exclude purchases of Russian gas.

Service provider Prisma will open the online platform for companies to register as of mid-March. Also in March, Prisma will launch a call for interest for central buyers, who cannot be Russia-affiliated in any way. Once selected and published, this will allow the companies to form groups around a central buyer. Prisma will help with the matchmaking between the aggregated demand and the suppliers.

In April, Prisma will open a window of a few days for companies registered on the platform to submit their demand, individually or jointly, with the first tenders expected to be launched later that month and the first supply contracts expected to be signed towards June or July. The tenders will happen on a rolling basis, so the first tender will not reflect the final aggregated demand for 2023.

Back in November last year, EU member states agreed to refill their underground gas stocks to 90% of their capacity by Nov. 1, 2023, and to buy 15% of these mandated storage volumes via the joint purchase mechanism. This was one of the market intervention measures adopted by the bloc to help tackle the current energy crisis and unprecedented gas shortage.

The bloc also agreed to voluntarily cut its gas demand by 15% between August 2022 and March 2023 compared to the five-year average for that eight-month period. In August-December last year, EU gas consumption dropped by around 18% to 134.44 bn m3 from an average of 165 bn m3 for this period on average in 2017-2021, Eurostat data show. And in all of 2022, the EU consumed around 356.8 bn m3 of gas, or roughly 11% less than the 2017-2021 average of 402 bn m3.

Gas demand in Europe between August 2022 and January 2023 dropped by 42 bn m3, EU energy commissioner Kadri Simson said at an EU press conference on Mar. 9.

But despite the drop in gas demand, “we are still in unchartered waters,” EU energy commissioner Kadri Simson said at an EU press conference on Mar. 9. She underlined the potential impact of drought and temperatures on electricity production and consumption as seen last summer which can support demand for gas. “I am going to propose to member states to prolong the voluntary demand reduction target by 15% until next year,” Simson announced.

She highlighted that in less than a year, the EU expanded the portfolio for 23 LNG regasification terminals, and launched or started developing eight new terminals which will boost the bloc’s annual regasification capacity to some 227 bn m3 by 2024 from the current 178 bn m3. Speaking about Russian LNG, Simson said “I do believe that there is no need to renew contracts with Russian suppliers.”

France’s TotalEnergies and Spain’s Naturgy have long-term offtake agreements for a combined 6.5 mtpa from the 17.4 mtpa Yamal plant, Russia’s largest export plant. France and Spain together received approximately 8.9 mt of LNG from Yamal last year or 43% of the plant’s exports, compared to around 6.4 mt in 2021 or 33% of the plant’s exports that year, Kpler data show. In January-February 2023, they received around 1.6 mt or 48% of the plant’s exports.

Russia overtook Qatar as the bloc’s second-largest LNG supplier last year, boosting its exports to the bloc by 4.13 mt year on year to 15.12 mt, Kpler data show. Almost all of it came from plants owned by independent producer Novatek. In January-February, the EU received around 2.83 mt of Russian LNG, compared to 2.35 mt in January-February 2022.

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