Risk Center

Energy security for winter dependent on weather and LNG supply 

The overall gas situation in Europe remains stable despite hot weather in southern Europe over the past month. TTF index prices have largely remained below €30/MWh for the second half of July following a June price spike due to outages at Norwegian gas facilities which saw prices reach a summer season high of €41.70/MWh. The continent is also on track to enter the 2023/24 winter season with full gas stores as storage levels are sitting at 85.37% as of July 29 – well ahead of the pace required to reach the EU’s original November storage target of 90% 

Some short-term volatility in gas supplies is expected over the coming weeks. Further maintenance outages are planned at Norwegian gas assets including the Kollsnes gas processing plant in August and September. Russian LNG supplies are also expected to fall in August due to planned maintenance at the Yamal LNG plant while feedstock supplies to the Cove Point LNG plant in the U.S. have been reduced due to a pipeline fire. These disruptions are not expected to impact the overall energy outlook for winter as high gas storage levels will allow the continent to withstand short-term supply volatility in international gas markets.  

Legal and policy issues  

On the other hand, the EU could see a significant long-term reduction to its gas supplies if an ongoing legal dispute between Gazprom and Ukraine’s Naftogaz over minimum contracted gas supplies to Europe results in a halt of the remaining Russian pipeline supplies to the region. Russia still supplies Europe with around 0.035-0.045 bcm/day of natural gas via Ukraine and a halt in deliveries would effectively sever all remaining European pipeline connections with Russia outside of the Turkstream. A halt could result in the continent losing access to around 10 bcm of natural gas supplies for the 2023/24 winter season, amounting to 10% of total gas storage capacity.  

On the policy front, efforts to revamp the bloc’s electricity market appear to have stalled as member states continue to disagree over whether the new rules would grant subsidies to existing energy plants. The prospect of granting subsidies to nuclear plants has emerged as a key sticking point in negotiations with countries reportedly divided into pro-nuclear and pro-renewable energy blocs led by France and Germany respectively. Reforms to the EU’s energy market are still seen as necessary to prevent a repeat of 2022’s energy price spikes and to bolster the ability of the continent’s energy grid to handle increasing renewable power generation. 

Gas storage levels are healthy but industrial output remains muted 

The EU remains well on track to achieve its 90% gas storage target for the 2023/24 winter season with stores in all countries surpassing 80% except for Latvia, Hungary, Romania, and France.  However, European industrial output continues to be muted with chemicals manufacturer BASF reporting that German chemical production has declined around 17% year-to-date as of July 2023.  

Around 20-25% of European chemicals production volume is currently curtailed at more than 30 chemical plants throughout the continent due to production disruptions caused by elevated energy prices and demand reductions.   

Everstream clients are receiving more detailed insights and recommendations about this risk. 

Contact us to learn how we can give you a complete view of the risks affecting your end-to-end supply chain and what you can do to mitigate them. 

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