2023: a year of records in energy
There is a great mismatch between dominant climate narratives and the reality facing the global energy sector. 2023 will be a record year in terms of worldwide coal, oil and gas production and consumption. As expected COP28 was much ado about nothing and, unless there is a massive worldwide recession, 2024 should beat 2023 on all those metrics.
Let’s turn to the EU Commission, which is asking coal, oil and gas-producing countries to phase out their own output, while setting over-ambitous domestic green demand ”targets” for 2030. As it is highly unlikely that voters would accept the drop in global living standards required to achieve them, those targets will not be met. The future commission that is in power in 2030 will have to postpone those targets.
Shorter term, with MEP elections in June 2024, the next Commission should face an EU Parliament that’s far less green and more blue. It will therefore continue to shift from its 2019 dogmatic green deal to more pragmatic policy.
The next EU Commission will need to move away from its magic modeling to take into account thermodynamics and voter acceptability. This could be achieved with a Commissionaire not only in charge of the usual Energy & Climate but of Industry, Energy & Climate to reverse the desindustrialisation and the carbon leakage processes that occured over the last few decades.
Gazprom's 2023 production at lowest level since 2007
Turning to Russian gas, Gazprom CEO Alexey Miller's lengthy end-of-year message to the company's employees1, in which he summarised the results of 2023, focused largely on work in east Russia and the country's "technological sovereignty against background of sanctions." Even after Western contractors left, Gazprom was able to fully implement, in time, its Eastern programme. But one important piece of data was missing from the results: Gazprom's 2023 gas production. Taking into account exports to Europe (down by 36bn m3) and to China (up by 7bn m3), and assuming strong demand growth in Russia and "neighboring friendly countries" (Kazakhstan, Kyrgyzstan and Uzbekistan), Gazprom's production in 2023 should have come to around 400bn m3, marking its lowest level since 2007.
Gazprom's gas production
Sources: Gazprom, thierrybros.com
Record low Russian gas flow to EU
Gazprom exported 2.4bn m3 to the EU in December, versus 2.3bn m3 in the same month of 2022. That means its supplies are up year/year for the fourth month in a row. But on a full-year basis, Gazprom's deliveries to Europe were at their lowest level in decades.
Gazprom's monthly gas exports to EU
Sources: Gazprom, Entsog, thierrybros.com
Gazprom exported 25.9bn m3 to Europe in 2023, down 58% yr/yr. Of this amount, 53% was sent via Ukraine and 47% via Turkey. It is worth mentioning that on top of that, the EU received 21bn m3 of Russian LNG last year.
Russia's annual gas exports to Europe
Split of Gazprom's monthly gas exports to Europe by route
Sources: Gazprom, GTSOU, Entsog, thierrybros.com
Record global LNG production and LNG supplies to EU in 2023
LNG send-out in the EU was at an all time high in April of last year, with a maximum daily volume recorded on April 20. Since July, LNG send-out is down versus last year as Asia has seen a revival in imports.
EU LNG send-out (excluding Malta)
Source: GIE, thierrybros.com
On a full-year basis, EU LNG send-out in 2023 was up 3% yr/yr, in line with global LNG supply growth. With LNG supply picking up in 2024, we should expect the EU to continue using LNG at a high level as it is needed as premium supply to meet its growing gas demand.
Global LNG supply growth
Source: GIIGNL, thierrybros.com
EU gas storage level hits record in 2023
EU gas storage utilisation reached an all-time high of 99.6% on November 5. A month later it moved back within its historical range, but is still higher than it was a year easrlier. The bloc entered 2024 with its storage facilities filled to 86% capacity, compared with 84% at the start of 2023, leaving plenty of flexibility for managing potential cold snaps during the remainder of winter.
EU gas storage utilisation
Source: GIE, thierrybros.com
Even under the worst-case scenario, if the rest of the winter is cold and the EU loses its remaining Russian gas, the Commission's new intermediate gas storage targets of 45% by February 1 and May 1, should be reached. That is unless 2024 provides further unexpected major new developments.
Happy New Year,
Dr. Thierry Bros
Energy Expert & Professor
January 2, 2024