[Teeth53]

Euro in a mess...

https://youtu.be/K0sKXI0BSF4

Euro is in desperate straits this winter. Hope ending its energy crisis hinges on a weakened China. Ever since the Ukraine invasion eight months ago, Europe has been scrambling to replace Russian energy imports and grapple with soaring energy prices. 

Before the war, Russian natural gas accounted for 40% of Europe’s consumption.

But with its energy crisis likely to last longer than just one winter, Europe is starting to worry about what China does next. A harsh winter in China or an improved economy next year could cause its demand for energy to rise again, and leave Europe in the cold. Stakes are huge for Europe, whose own economy and citizens are hanging in the balance over the energy shortage.
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China’s natural gas consumption is already expected to increase 5% in 2023. The scenario for next year for Europe is certainly going to be more complicated

China’s gas roller coaster in 2021, China overtook Japan to become the world’s largest importer of LNG, bringing in 79.5 million tons of it during the year, Ryhana Rasidi, a natural gas analyst at commodity analytics firm Kpler, told Fortune.

But this year, China’s LNG imports have slowed dramatically. During the summer, they tumbled 14% owing to COVID lockdowns and slower economic activity, the largest decline since China began importing LNG in 2006, according to energy consultancy Wood Mackenzie.

The door for European nations to pounce on the leftover global LNG. European countries have signed big deals this year with suppliers including the U.S. and Qatar. Europe has also been able to tap China for some of its excess imported LNG. Between Jan and August of 2022, Chinese energy companies offered about 30% more LNG for resale on the global market than they bought over the same period, according to the IEA.

But Chine economic growth and preparing for the winter heating season, the Chinese gov has asked energy companies to stop reselling LNG overseas and to keep it for domestic, any increase in China’s energy consumption—even a cold winter that sends demand soaring— likely to hurt Europe much. China’s energy appetite will likely be a larger and long-term competitive issue for Euro.

China expects natural gas to play an increasing role in the coming years. Its share of overall energy use in the country is forecasted to grow from 8.7% in 2020 to 12% by 2030, before increasing “significantly” by 2035. Part of this will involve expanding domesti will also require China to keep growing its LNG imports as well as imports by pipeline in the next few years.

European authorities have also recognized the risk. In a presentation on the Euro Union’s electricity market, the Agency for the Cooperation of Energy Regulators (ACER) informed EU. This raises questions as to when China’s LNG demand may turn back towards normal growth rates,” it continued.

For Europe, the looming reality is that as bad as this year’s energy crisis is, next year’s will likely be worse as Russian natural gas supplies dry up even more and as China will be a key determinant for our energy security for the next 12 months.