Gas markets are expected to remain under pressure well into 2023, the International Energy Authority warned on Monday, as Russia continues to cut supplies to Europe.
Publishing its latest quarterly gas report, the Paris-based IEA said Russia’s ongoing curtailment of natural gas flows to Europe “had pushed international prices to new highs, disrupted trade flows and lead to acute fuel shortages in some emerging and developing economies, with the market tightness expected to continue well into 2023”.
The IEA expects global gas consumption to decline by 0.8% in the current year because of both a “record” 10% slump in Europe and flat demand in the Asia Pacific region.
Consumption is forecast to grow in 2023, but only by 0.4%, with the outlook subject to a “high level of uncertainty, particularly in terms of Russia’s future actions and the economic impacts of sustained high energy prices”, the IEA warned.
In particular, it noted: “As the summer ends in the northern hemisphere on new highs for natural gas prices and volatility, and markets brace themselves for a winter of unprecedented uncertainty of supply…security of energy supply has come a priority issue for consumers and policy makers across major consuming markets.
“A complete shutdown on Russian pipeline flows to the European Union cannot be ruled out.”
Keisuke Sadamori, director of energy markets and security at the IEA, said: “Russia’s invasion of Ukraine and sharp reductions in natural gas supplies to Europe are causing significant harm to consumers, businesses and entire economies – not just in Europe but also in emerging and developing economies.
“The outlook for gas markets remains clouded, not least because of Russia’s reckless and unpredictable conduct, which has shattered its reputation as a reliable supplier. But all the signs point to markets remaining very tight well into 2023.”
The report coincided with comments from Ofgem, the energy regulator, which acknowledged that there was a “significant risk” of gas shortages in the UK, because of the war in Ukraine and gas shortages in Europe.
According to both The Times and Bloomberg, Ofgem has told suppliers there is a possibility that Great Britain could enter a “gas supply emergency” this winter. Should that happen, supplies to some gas-fired power plants will be cut off, meaning they would not be able to generate electricity, resulting in potential blackouts.
Generators that have their gas cut off can be fined for failing to deliver promised electricity supplies. The Times said SSE, which owns a number of gas power stations, is calling on Ofgem to change the rules.