Years of tensions in the gas market await us, warns Andrea Stegher, current vice president of the International Gas Union (IGU) and next president of this body. The war in Ukraine has changed the market, and you have to bet on new connections. Stegher has been this week in Barcelona, where he has participated in a conference promoted by Sedigas at the Col·legi d' Enginyers Industrials de Catalunya.
What will happen to gas prices?
In today's context, the crystal ball is a bit opaque. We live in a tense moment. The situation of high prices and the concern for the security of supply, the uncertainty about the possibility of attracting more volumes in the market to meet the European demand and that allows replacing the entire flow of gas that came from Russia could last for at least two or three more years. It depends a lot on what happens with China.
What does China have to do with it? She believed that the topic was Russia ...
The current decline in Chinese demand today helps us because its consumption has fallen for the first time in two decades, when in recent years its demand was growing at a rate equivalent to the market of all of France in one year. But if China recovers... we will have a very strong tension. Europe may still have pockets deep enough to pay for high-priced gas. But there can also be a paradox.
Which?
The most worrying risk is that China does not have contracted all the liquefied natural gas (LNG) it needs and enters into competition with Europe for limited resources. But it could also be the absurd case that China ends up attracting more gas than it needs (to meet its domestic demand) and ends up reselling it to Europe, but at a higher price, thus obtaining an enormous benefit at the expense of the pocket of consumers and the competitiveness of European industries. Consider that China and Turkmenistan reached an agreement in 2009 and the Turkmenistan-China oil pipeline was launched, which today transports 30,000 million cubic meters. Europe could have participated in the investment, but it missed the opportunity. And this can have consequences.
What is it referring to?
Other countries in the world, for example India, Pakistan, Bangladesh or Indonesia, will be forced to return to coal. China itself has coal developments in the making for the equivalent of an additional 33 gigawatts. As a reference, Spain has a total installed power of combined cycles for electricity generation (those that use gas) of 26 GW. We will all end up losing as a collective.
Will we be able to reduce consumption?
I would say that it is a very big ambition. In addition, we must not forget that, in a certain way, boasting about the reduction in industrial demand is a potentially very ephemeral boast, because it means not only reducing but destroying industrial demand, through the closure of the activity or the relocation to other countries. more stable and favorable environments.
So Europe is right to go looking for gas in other countries? Is there any other solution?
Next winter will be more difficult for the EU. Only 20 BCM (billion cubic meters) of additional LNG will be available in 2023, the lowest amount in years, and that's bad news if you want to replace Russian gas. Other suppliers must be sought (Qatar, the United States, Egypt, Israel...), but the development of new projects is complex and requires considering a long-term time horizon. This means having contractual visibility, and at the moment there is none. When I was working in the corporate sector, our long term used to be about 25 years. Now the long term has been reduced to twelve months. This discourages investors, who will not carry out million-dollar investments in new gas exploration and production projects and liquefaction and transportation infrastructures if within a few years these additional productive capacities are not going to be necessary because Europe decides that they are no longer You want them or you don't need them.
But Qatar and Germany have just signed a contract.
Yes, it is going in the right direction because it is 15 years old, but in the industry as a whole it is very small. If you look at the new LNG supply contracts signed by the Americans, 95% of their customers are Chinese. Why? Because they are long-term contracts. And it is also necessary to consider the demographic aspect.
In what sense?
Europe between 2002 and 2020 grew by about 15-17 million people. This same absolute increase was recorded by Algeria alone. And Egypt has increased by 30 million. Gas is one of the energies that they can develop, they have availability, but they also have their energy needs. So we Western countries have to figure out how to help them use it in the best way. When I visit someone and I need something from them, I must first say: “What can I do for you?” Because if not, the association does not work.
Do we have to assume that the era of abundance that we have had is over?
Until a certain point. We have enjoyed such a situation in Europe for the last 20 years that we have forgotten that energy has a value chain that is far removed from us. Basically, Europe largely imports the energy it uses. For us, using gas was like going to the supermarket and buying a packet of pasta. I mean it in Italian terms. You know that there is always and that you will find it and you never wonder where it comes from. Now this structure has to be rebuilt.
With more connections? Like the MidCat?
I have always been in favor of creating a single energy market. Because I consider it an important ambition. There are projects that were defined as strategic on a European scale. Then, due to particular interests, situations that have their own motivations, but very local and very contingent, and in the end nothing was done. Here, in recent years, we have politically decided that we already had everything and that we no longer needed anything. But as the current situation has shown, the connections serve to reduce the risk of joint supply from Europe and promote solidarity between member states.
The post-Russian era...
There are some interconnections in Central and Eastern Europe that have to be reconfigured, because the flows at this time will no longer come from the east, but from the north. But it is also necessary to improve the standards. I always cite an emblematic case: it took 13 years to start the electrical connection between Sicily and Calabria and 13 authorizations were required.
Does the solution go through more renewable energy?
Undoubtedly, we must promote more traditional renewable energies, but also others such as renewable thermal, biomethane and hydrogen, which will play a fundamental role in reducing greenhouse gas emissions. The latter is the ultimate goal. But also take advantage of technology and innovation to remove and store CO2 and take advantage of it for industry, which uses it in processes for the manufacture of food or fertilizers. The energy sector simply needs to work better and cooperatively; there is no technology left over.
