SPECULUM VERUM
Despite European efforts to disengage from Russia's energy faucet in the aftermath of the war in Ukraine, Moscow coffers continue to benefit from hydrocarbon purchases by EU countries. and in this, Spain is being an indisputable leader, at least as far as liquefied natural gas is concerned (LNG) russian respects.
According to LNG tanker tracking data compiled by Bloomberg, Spain is the Member State of the European Union that has imported the most LNG from Russia so far this year. 2023. The country has fired a 84% its purchases of this fuel since the start of the large-scale invasion of Ukraine ordered by President Vladimir Putin. In the first two months of this year, Enagás' monthly statistical bulletins reveal an increase in 172% compared to the same period last year. An uncomfortable reality that has sparked reactions both in Madrid and in Brussels.
The Ministry of Ecological Transition and the Demographic Challenge, led by Teresa Ribera, sent the past 14 March a letter to the companies that import liquefied natural gas in Spain in which it requested their collaboration to limit purchases that benefit Moscow. the missive, originally revealed by Bloomberg, was received by Naturgy, Repsol, TotalEnergies, Axpo, Pavilion, enagas, Met Energy, Enet Energy, EdP, CEPSA and BP. In her, they were asked to "intensify the diversification of the supply of liquefied natural gas and do without that of Russia".
Ribera's letter replied to the request launched earlier this month by the European Union's Energy Commissioner, Kadri Samson, that European companies do not sign or renew long-term contracts for the purchase of Russian gas. But the reality is that, both in Spain and in the rest of the EU, there is no mechanism beyond words to stop the flow of hydrocarbon to the continent. Importers are private companies and transactions are completely legal, Given the, unlike crude oil and its by-products, there are no vetoes or sanctions against LNG from Russia.
Although Spain is the country where the increase has been more exaggerated, the growing appeal of Russian LNG has been reflected throughout the European Union. Imports of this fuel skyrocketed to the 19.250 million cubic meters (19,25 bcm) in 2022, in front of the 14 bcm acquired in 2021, an increase of 35%, according to the account of the think tank Bruegel.
Before the full-scale Russian invasion of Ukraine, Moscow supplied about a 40% of all the gas consumed in the European Union through the extensive network of gas pipelines that connect the Eurasian giant with the rest of the continent. From the 24 february, the flow of this hydrocarbon gradually decreased until it represented, currently, and 10% of European gas imports. The largest purchases of Russian LNG are due, to a large degree, to efforts to fill the void created by this drastic reduction.
The legacy of this European dependency is, precisely, the one that prevents the implementation of sanctions against LNG that comes from Moscow. Last year, with sky-high gas prices of up to 300 euros per megawatt hour (MWh), the Twenty-seven moved land and air to fill their fuel tanks for the winter. In this context, imposing any kind of cap on supply that could drive prices even higher was non-negotiable in Brussels. “Since the beginning of the invasion of Ukraine, It became clear that it would be extremely difficult to reach a consensus on an embargo on any gas supplies.", explica Szymon Kardaś, researcher of the European energy program of the European Council on Foreign Relations (ECFR), in an interview with El Confidencial.
This year, the situation is much more placid, with stable prices of around 40 euros per MWh and some tanks that continue to be full at 60% after the end of the winter season, which is an all-time high and 38 points more than on the same date of 2022. Nevertheless, several of the member states – led by Viktor Orbán's Hungary – remain opposed to any embargo on Russian gas, despite the drive of some Baltic countries to achieve this.
Given the inability to reach the unanimous consensus necessary to impose sanctions, European institutions are trying to find alternative ways to stop the arrival of Russian LNG. The Energy Ministers of the Twenty-seven agreed on Tuesday in the Council of the European Union to seek options to give legal tools to member states to temporarily veto the ability of Russian and Belarusian exporters to reserve the necessary infrastructure to deliver liquefied gas. This, as long as it does not affect the security of supply.
But from said to fact there is a long way. The proposal is part of the Council's negotiating position on the new European rules for the gas market. This measure, among many others that make up the plan, must be negotiated with the European Parliament in a long process that can take months. Sources from the Spanish gas sector tell El Confidencial that the language used in the initiative amounts to little more than a recommendation, similar to that already carried out by Ribera and Simson. "Sincerely, It doesn't change much", sentence one of the representatives consulted.
The problem goes beyond convincing European energy companies. No Spanish company, for instance, has signed a medium or long-term contract for the supply of Russian gas since the start of the war. In fact, The only agreement of this type in force in the country is the one reached in 2013 And till 2042 by Naturgy with the Yamal LNG consortium, whose majority shareholder is the Russian company Novatek. Nevertheless, what does exist is a multitude of trading companies (trading), many based in Spain, that have skyrocketed their acquisitions in the spot market (spot) to benefit from the current attractive prices, storing the gas and hoping to resell it in the future.
The problem has no solution in sight and, in fact, runs the risk of expanding throughout this decade, given that the number of LNG regasification and storage plants in Europe is set to grow considerably. The manifest objective of these facilities is to get rid of dependence on Russian hydrocarbons, but they could end up full of this product. “You build all this infrastructure to get rid of the vendor that rigged your markets. (Of gas) and it caused you great difficulties… To later accept the same supplier through the LNG?”, said Lithuanian Deputy Minister of Energy, Albinas Zananavicius, speaking to Reuters. “There is something wrong with that logic”, sentenced.
Pan para hoy, I'm sick for tomorrow
Financing Russian coffers is not the only problem facing European countries as a result of this boost to gas infrastructure. The Institute for Energy Economics and Financial Analysis (JEFA, for its acronym in English), a US-based think tank, revealed in recent research that the continental appetite for new LNG import projects is on track to generate regasification capacity that will vastly exceed demand in the coming years.
The report warns that, given the battery of regasification plants that are being built in European countries, Europe's liquefied gas import capacity is set to exceed by 2030 los 400 bcm, an increase of 130 bcm, near a 33%, in comparison with 2022. Nevertheless, the demand estimated for that year by the forecast of the S&P Global Commodity Insights es de apenas 190 bcm. IEEFA's own estimate is even lower., of only 150 bcm.
This excess capacity —described by the author of the analysis, Ana Maria Jaller Makarewicz, as “the most expensive and unnecessary insurance policy in the world” – could end up being a drag on the continent's economy. “There is a real risk that we have invested too much without correctly analyzing the situation that we could face. We may find ourselves with a challenge of stranded assets in a long-term perspective”, points Kardaś to this newspaper.
According to the IEEFA study, spain, the country with the largest regasification capacity in the EU, It is also the country with the highest risk of stranded assets, with excess capacity 50 bcm. followed by Türkiye (44 bcm) and UK (40 bcm). By the end of the decade, the analysis foresees a use of only one 36% of LNG terminals in Europe.