Europe’s natural gas market is facing significant challenges as winter approaches, with external factors expected to create a tight market at the end of 2024 and early 2025, according to Torgrim Reitan, Chief Financial Officer of Norwegian energy company Equinor.
The market will be influenced by the expiration of the Russia-Ukraine gas transit deal and increasing demand for LNG in Asia, Reitan said in an interview with Bloomberg TV on Wednesday.
Equinor, the largest gas producer offshore Norway, is now Europe’s leading natural gas supplier, providing about 30% of the region’s total demand. This shift occurred two years ago when Norway overtook Russia as Europe’s top gas supplier after the Russian invasion of Ukraine and its decision to cut off pipeline deliveries to several European countries.
As the winter heating season begins, the European gas market is under pressure due to a number of factors, including a sharp drop in wind speeds in northwestern Europe, a dispute in Austria regarding Gazprom’s deliveries, and the upcoming expiration of the gas transit deal with Ukraine at the end of 2024. Ukraine has announced it will not negotiate a renewal of the agreement with Russia.
Last week, Slovakia’s national energy company, SPP, signed a short-term deal with SOCAR to buy natural gas from Azerbaijan, preparing for a potential disruption of Russian gas supplies via Ukraine.
In addition to the uncertainty surrounding Russian deliveries, colder weather in Europe has increased demand for heating and gas-fired electricity, further driving up natural gas prices. The demand surge has been amplified by the so-called ‘Dunkelflaute’ – a German term describing the period of low wind speeds and reduced wind power generation, which has led to a rise in gas demand for electricity generation.
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