The energy emergency is making this winter harder, but next year will be even harder, Fatih Birol, executive director of the International Energy Agency, warned, POLITICO reported.
According to him, 2023 will see the lowest amount of new liquefied natural gas (LNG) capacity in many years - only 20 billion cubic meters. This will be a blow to the EU, which is increasingly dependent on LNG.
“Prepare yourself for next winter. Next winter might be much more difficult than the winter we are experiencing now," Birol told POLITICO's Sustainable Future Week.
The EU still gets a small amount of Russian gas, which probably won't happen in 2023. There is also the possibility that China will abandon its policy of isolation from COVID and its energy demand will increase, competing with the EU for limited LNG cargoes.
Birol also warned the EU about price controls on imported natural gas. There is pressure from some EU countries for such a cap. The European Commission's proposal last week to cap the price at which gas can be sold under the EU's main benchmark, the TTF, was heavily criticized for setting the bar so high that it would never be activated, and Brussels is working on the idea again. But countries such as Germany and the Netherlands are very skeptical of the measure, warning that it could destabilize markets and reduce LNG supplies.
"A gas cap could make Europe weaker in terms of international competition" for gas purchases, he said in an interview on the sidelines of the event.
He also said that limiting Russian oil prices, a G7 plan that is currently being actively discussed by EU countries, should aim to put maximum pressure on the Russian economy without creating supply disruptions in oil markets.
The EU embargo on the purchase of offshore oil from Russia comes into force on December 5. The G7 oil price cap is part of a broader effort to keep Russian oil available on world markets, but to keep its prices at a level that would reduce Russian revenues.
The European Commission is proposing a cap of $62 a barrel, close to the current discounted price of Russian Urals crude, but Poland, Lithuania and Estonia are pushing for a lower level. Ukrainian President Volodymyr Zelenskiy wants a ceiling of $30 to $40 per barrel.
Birol called for a dynamic cap that would adapt to market conditions.
Although the EU has some tough years ahead and global energy markets are destabilized, Russia has the most to lose, Birol believes. “Is Russian winning the energy battle? The answer is absolutely no," he said, adding: "Russia will not be able to replace Europe just like that — it will take ages. Russia's role in the international energy system will be much diminished.”
He noted that Russia's mature and geologically complex oil and gas fields and its dependence on Western investment and technology to keep wells running make it likely that the decline in production will be irreversible. He estimates that Russia will lose $1 trillion by 2030. “Russia was playing in the Champions League before, now it will be playing in a much lower division,” he said.
“This energy crisis, funnily enough, is giving a boost to the clean energy transition,” Birol said, with a surge of investments driven less by climate concerns and more by worries about energy security.