In an interview with Belgian news outlet L’Echo on Saturday, TotalEnergies CEO Patrick Pouyanne said that due to Europe’s need to refill its reserve stocks of gas this summer while gas supplies from Russia are severely diminished, it can be expected that supply constraints will continue to plague the European gas market this year.
Because of this, Pouyanne predicts that the current dip in energy prices will not continue for long.
He said, “The winter is quite mild, the storages are full, Europe needs to import less liquefied natural gas (LNG). But the fundamentals remain there: in 2023, Europe will receive less Russian gas than it received in 2022. It will again have to massively re-import LNG, even though it has not yet settled its re-gasification capacity problems… And as Europe will need to import more than in 2022 when it received Russian gas for about half the year, the situation will become tense again.”
According to Pouyanne, the global LNG market was already shocked last year when one eighth of it, almost 50 million tons, needed to be rerouted to Europe to fill the void left as Russian supplies gradually dwindled under the weight of Western sanctions imposed as punishment for the country’s military actions in Ukraine, and even outright sabotage of its pipeline infrastructure.
The CEO added, “It’s a shock, Europe did it, but it paid more. The entire LNG market is now constrained by supply. And it will not loosen up before 2025-2026, because when you look at the new projects announced, in the United States and in Qatar, they will only go into production in a few years.” He went on to point out, that if the EU wants to replace all of the gas it received from Russia before the Ukraine conflict (100 million tons per year) then this year it will have to double the volumes of LNG it imported last year.
He added the difficulty which will arise is that for most of last year the Chinese economy was closed due to post-pandemic difficulties. This year, as Europe needs to import twice the gas, China is expected to fully reopen for good, which will substantially boost the demand for LNG and put the pressure squarely on the European market.
