Possibilities for phasing out Russian gas for the 2022/2023 and 2023/2024 winter from the EU energy supplyUploaded: 31 of October, 2022

The goal of the study was to follow up on the recent developments of the gas market both on the supply and demand market – and build them into the forward-looking analysis for the 2022/2023 gas year and for the 2023/2024 gas year.

Based on the results of the previous project we had to reflect on the main risks and unexpected challenges that might rise from the supply, EU27 demand and global gas market developments.

Modelling is expected to contribute to prevent shocks by identifying feasible strategies and useful regulatory measures on the European market with the main focus on EU27.

We did so by using the full Russian cut of gas supplies to EU scenario of the previous project as a basis of the analysis and run scenarios to assess the impact of global LNG supply and EU demand on the outcome of the next two winters in terms of: gas bill to the EU; utilization of LNG terminals, and regional price differences.

Previous analysis showed that without any measures in place, the full supply cut scenario resulted in 300% gas bill increase of the EU27. Even with a small share of RU gas in the mix (NS/Y supplies some gas up until end of August) the gas bill would skyrocket.

With limited RU supply in 2022 and with substantial price increase on TTF the European storages were filled up to the 80% target by August 2022. The security of supply threat for the next winter has been handled. The main question remained: how to fill up the storages next year (2023/2024)?

We assumed different LNG price levels (25-150 €/MWh Japanese Price representing the availability of spot LNG on the global market) and storage obligations to be in place (80% storage target in 2022 and 90% in 2023). We combined different storage use levels (Storage fill up level combinations: Starting levels: 10-20-30-40-50%; End of yr Storage level: 10-20-30-40-50%) to assess the impact on the EU gas bill. We found that EU gas bill and market outcomes are determined by starting storage inventory and global LNG price. Low initial storage levels in European gas storages create high injection demand for the coming season. Sufficiently high (>30%) starting storage inventory by end of March 2023 (combined with EU measures on additional LNG supply and infrastructure developments) effectively mitigates the adverse effect of missing RU supplies. With inadequate (<30%) storage inventory, Europe is willing to pay any price for refilling its storages and does not efficiently reduce the gas bill even with combined supply and demand EU measures.

The policy brief 2022/06 detailing our assumptions and results can be found here.