Europe’s natural gas market will tighten again in 2023 as stockpiles will have to be replenished over the summer without the usual Russian supply, according to TotalEnergies SE Chief Executive Officer Patrick Pouyanne.
“Europe will get less Russian gas than in 2022 and will have to again massively re-import LNG,” Pouyanne told Belgian newspaper L’Echo. “The situation will become more tense again.”
The region has managed to keep gas stockpiles fuller-than-normal so far this winter as unusually mild weather reduced demand while imports of liquefied natural gas remained strong. Inventories will end the winter about 50% full, and enough gas has been procured to fill storage sites again well in time for next winter, according to BloombergNEF. The optimism has pushed gas prices down about 30% in the past month.
Still, the deep cuts in Russian supply remain a concern. It increases Europe’s competition with Asia for LNG, and higher demand there could make it more difficult to procure the crucial cargoes needed to refill inventories.
Pouyanne said that European countries should diversify energy suppliers, mostly through long-term contracts.
He also said there isn’t a risk of diesel shortages in the region. Total will run all its refineries, including in Saudi Arabia, to prioritize supply to Europe. But he warned that this will bring extra transportation costs. “It’s always the same story, there is the supply but there is also the price.”
A European Union ban on imports of Russian oil products, including diesel, comes into force Feb. 5. Some analysts have warned this could create shortages in the continent. Russia accounts for 15% of global diesel flows, with 80% of that going to Europe until recently, according to Goldman Sachs Group Inc.
©2023 Bloomberg L.P.