FT told what helped Europe overcome the 2022 energy crisis

Unprecedented measures in energy policy, demand reduction by CHINA, the commissioning of floating regasification units (FRGU), as well as “luck with the weather” helped Europe overcome the energy crisis caused by a sharp reduction in gas supplies from RUSSIA in 2022, writes the Financial Times (FT) .

As the newspaper notes, PRGUs began to be put into operation en masse after the crisis began. As a result, they were able to replace almost 10% of Russian gas supplied through pipelines, and also reduce the price of gas from a peak of €300 per megawatt-hour in August 2022 to €30 today.

The PRGU is a floating liquefied natural gas (LNG) storage facility equipped with a ship-based regasification unit. it is created, as a rule, on the basis of a gas tanker. Compared to land-based LNG terminals, PRGU has a number of advantages, including lower cost, shorter construction time, and mobility.

According to the FT, in addition to such installations, unprecedented measures in energy policy, demand reduction, and “luck with the weather” helped Europe survive an unprecedented crisis. “In terms of both storage capacity and prices, we are in a much better position now than I thought three years ago,” said Anne-Sophie Corbeau, a fellow at Columbia University's Center for Global Energy Policy.

However, this does not mean that Europe is “in safe waters.” The newspaper points out that the short-term response to the crisis may have created bigger problems for the bloc in the future, including heavy dependence on historically volatile LNG markets. This dependence, according to the FT, will have consequences for both industrial competitiveness and the transition to a green economy.

As Alexandru Mustata, a representative of the energy company Beyond Fossil Fuels, noted, it will be difficult for EU countries to fulfill the obligations enshrined in the 2015 Paris climate agreements when there are “a large number of gas power plants that do not have an end-of-life date.”

A senior EU official, speaking on condition of anonymity, told the FT that after the energy crisis began in 2022, Europe feared not only a blackout, but also that there would be no way to heat homes. He recalled that the EU is 90% dependent on gas imports, and Russia’s share at that time was about 40%.

However, Europe, despite all the “stress,” managed to overcome the crisis fairly quickly, the newspaper notes. Former Snam CEO Marco Alvera cites unusually warm weather in the winter of 2022 as one reason, which allowed the bloc to build up its gas reserves. Another reason for overcoming the energy crisis was the slowdown in economic activity in China, which also made blue fuel cheaper on world markets.

ICIS HEAD of gas analytics Tom Majec-Manser added that Europe was also willing to pay a premium price for LNG, prompting traders to prioritize supplies to the EU over China . “Market signals played a critical role in allocating resources where they were needed,” he said.

Nearly half of LNG last year came from the United States , which is now the world's largest exporter of liquefied natural gas, the FT writes. The EU also received significant volumes from Qatar, the third largest exporter. However, supplies of Russian LNG also increased over the same period. The newspaper notes that the newfound dependence on LNG poses potential problems for Europe in the future, causing dependence on different partners, and potentially delaying the bloc's progress towards its goal of achieving net-zero emissions by 2050.

After the start of the special operation in Ukraine, Western countries imposed sanctions against Moscow , including a price ceiling onoil and gas. Russia responded by stopping selling raw materials to countries if the deal included a price cap . Moscow criticizes Western sanctions and notes that they harm those who impose them more. At the same time, the authorities noted the successful restructuring of energy exports to Asian markets.