Europe will run out of natural gas in 2023, with catastrophic results

The International Energy Agency has issued a dire warning that Europe would run out of natural gas in 2023, with catastrophic repercussions.

During the summer of 2023, Europe might confront a supply-demand gap of up to 30 billion cubic metres of natural gas if Russia ceases all deliveries.

The International Energy Agency (IEA) sounds the alarm, warning of the grave danger that Europe may run out of natural gas in 2023.

As seen by the inability of the 27 leaders of the European Union to agree on a unified set of policies and actions to address the energy problem, citizens and international organisations have been irritated.

The purpose of the Commission is to ensure that Europe has adequate energy reserves and to reduce prices.

"Examining the most recent trends and potential changes on the global and European natural gas markets reveals that Europe will confront an even greater difficulty next winter. Governments must take immediate action to expedite energy efficiency improvements and accelerate the deployment of renewables and heat pumps — in addition to other measures to structurally reduce gas demand.

This is crucial for Europe's energy security, its citizens' and businesses' well-being, and its transition to sustainable energy "Bloomberg reports that IEA Executive Director Fatih Birol stated the following.

Supply-demand deficit

Europe might suffer a supply-demand gap of up to 30 billion cubic metres of natural gas during the summer of 2023 if Russia ceases all deliveries, according to an analysis published by the world's foremost energy sector organisation on Thursday (3/11/2022).

"The shortfall might account for nearly half of the gas required to fill storage facilities to 95% capacity by the beginning of the 2023-2024 heating season," the agency stated.

It is "highly unlikely" that Russia will deliver another 60 billion cubic metres of natural gas in 2023 - the amount it estimates Russia will deliver in 2022 - and "Russian deliveries to Europe could be completely halted," according to an organisation that provides analysis and policy recommendations on global energy.

Due to growing gas prices and supply concerns, Europe has ordered its industry to save energy, and it has responded by reducing its demand for natural gas and electricity over the last academic year.

However, it is not recommended to rejoice.

Not only are European industries conserving energy, but they are also closing factories that may never return.

And while the reduction in energy use is assisting Europe in overcoming a crisis caused by the war between Russia and Ukraine and the disruption of Russian natural gas supplies, executives, economists, and industry groups warn that if energy costs remain high for an extended period of time, Europe's industrial base could shrink significantly.

Aluminum and chemical fertiliser companies will relocate to other regions of the globe.

Energy-intensive businesses, such as the aluminium, fertiliser, and chemical industries, may permanently shift their production to countries, such as the United States, where inexpensive energy is abundant.

Despite an unusually warm October and a prognosis for a mild winter, the price of natural gas in the United States is still one-fifth of what European industries pay.

Last month in London, Patrick Lammers, a board member at the utility E.ON, told a conference, "Many corporations are quitting generation."

"We are truly headed for calamity."

This month, manufacturing activity in the Eurozone reached its lowest level since May 2020, indicating that Europe is headed for a recession.

The International Energy Agency expects that in the third quarter of 2022, European industrial gas demand decreased by 25 percent compared to the same period in the previous year.

Analysts assert that the decline is due to the shutdown or closure of numerous European enterprises, as energy-saving measures alone cannot account for such a significant decrease in consumption.

A European Commission spokeswoman stated in an email, "We are doing everything possible to avert a decline in industrial activity."

Many German firms reduce operations

Nonetheless, a survey published today, 2/11/22, reveals that many German businesses are scaling back operations due to rising energy expenses.

According to a poll of 24,000 companies conducted by the German Chambers of Commerce and Industry, more than one-quarter of chemical companies and sixteen percent of automakers report being compelled to curtail production (DIHK).

In addition, 17% of automakers said they intended to relocate some production overseas.

"The repercussions are visible: especially energy-intensive businesses producing intermediate goods, like as chemicals and metals, are cutting their output," said DIHK CEO Martin Wansleben, alluding to the reduction in output of vital semi-finished items.

The dread of the industry's demise

Analysts claim that the energy crisis is increasing the migration of European industry to other regions of the world with cheaper labour and lower production prices.

"If energy prices remain so high that certain European industries become structurally uncompetitive, manufacturers will close and relocate to the United States, where shale energy is abundant and inexpensive," said Daniel Kral, a senior economist at Oxford Economics.

For instance, by 2021, the output of primary aluminium in the EU will be decreased by 50 percent, to 1 million tonnes.

According to statistics obtained by Reuters, all nine European zinc smelters have either reduced or ceased production and are now importing zinc from China, Kazakhstan, Turkey, and Russia.

The reopening of an aluminium facility might cost up to 400 million euros and is improbable given Europe's uncertain economic outlook, according to Eurometaux.

"Historically, these temporary restrictions eventually become permanent," he continued.

Europe currently finds it difficult to obtain the minerals necessary in electric vehicles and batteries.

However, Europe's efforts to acquire crucial minerals used in the production of electric vehicles and batteries for renewable energy sources are hampered by high energy costs.

Brussels is set to propose new legislation, the European Critical Raw Materials Act, at the start of the following year in order to build up reserves of minerals required for the transition to a green economy, such as lithium, bauxite, nickel, and rare earths.

Companies are reluctant to invest in Europe without a drop in energy costs, warned Emanuele Manigrassi, senior director for environment and energy at European Aluminum.

Examples of European industrial base contraction are rising.

Numerous instances illustrate the loss of Europe's industrial base.

This year, Europe became a net importer of chemicals for the first time, according to the European Chemical Industry Council (Cefic).

According to the International Fertilizers Association, more than half of European plants producing ammonia, a crucial element in fertilisers, have closed and been replaced by imports.

Yara, a Norwegian fertiliser manufacturer, has reduced its European ammonia production by two-thirds and has no imminent plans to reinstate it.

"We are closely monitoring the situation on the gas market and making contingency plans," CEO Svein Tore Holsether emailed Reuters.

The world's largest chemical company, BASF, questioned the viability of new plant construction in Europe last week.

The company has also warned that it will be forced to suspend operations at its major plant in Ludwigshafen, the largest industrial energy consumer in Germany, if natural gas supplies fall by more than half of its needs.

Some businesses, notably the German viscose fibre manufacturer Kelheim Fibers, which supplies Procter & Gamble, are seeking other energy sources.

This year, the Bavarian factory of the German business has dropped output by a ratio of two.

"As of the first of the year, we will be able to switch to oil," said firm CEO Wolfgang Ott, as the company seeks government assistance to lower energy expenses.

It is even proposing a 2-megawatt solar installation.

By fLEXI tEAM