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EU gas consumption plunges in Q2 on mild weather, high prices: EC

Highlights

Total EU demand down 16.3% to 71 Bcm in Q2

EU gas production down 3% to 12.3 Bcm

LNG retains biggest share of EU imports in Q2

  • Author
  • Stuart Elliott
  • Editor
  • James Leech
  • Commodity
  • LNG Natural Gas
  • Topic
  • Europe Energy Price Crisis War in Ukraine

EU gas consumption in the second quarter fell 16.3% year on year to 71 Bcm due to mild weather and demand destruction caused by high prices, the European Commission said Oct. 17 in its quarterly market report.

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Gas use in power generation -- which had been more resilient in the first quarter -- also fell in Q2, by 7% year on year, the EC said.

EU gas demand began to fall towards the end of 2021 as prices surged, primarily due to Russian supply curtailments.

Consumption was already down by 8% in Q1, but fell further in Q2, the EC said.

"High wholesale gas prices must have had a negative impact on gas demand in energy intensive industries, leading to a reduction in production," it said.

The TTF month-ahead price averaged Eur101/MWh in Q2, compared with an average of Eur25/MWh in the same period of 2021, according to Platts price assessments by S&P Global Commodity Insights.

The month-ahead price later surged to a new record high late August of Eur319.98/MWh ($312/MWh) on Aug. 26. It was last assessed Oct. 14 at Eur140.50/MWh.

The EC said gas demand for heating was reduced in April and May due to mild weather relative to the same months of 2021.

For the first half as a whole, EU gas demand was down by 11% year on year to 201.8 Bcm, it said.

The only EU member state to register an increase in gas consumption in Q2 was Ireland, where demand rose by 6.4%, the EC said.

"Gas consumption, in the order of percentage changes, fell by the most in Finland (down 55%), Slovakia (down 45%) and Latvia (down 33%)," it said.

Among the biggest gas consumer countries, consumption in the Netherlands fell by 25%, in Germany by 22%, in France by 13%, in Italy by 7% and in Spain by only 4%.

Spain has imposed a price cap on gas for use in power generation, which is likely to have dampened the demand reduction.

EU production

Gas production in the EU continued to decline year on year in Q2, the EC said, with total output at 12.3 Bcm, down 3% compared with the same period of 2021.

"In Q2, quarterly production remained well below both the range of 2016-2020 and 2021 figures, reflecting the long-term dwindling trend of domestic gas production in the EU," it said.

Production in the Netherlands -- the EU's biggest producer -- fell 23% to 4.5 Bcm in Q2.

Output continues to be curtailed by the phase-out of the giant onshore Groningen gas field, whose production quota for the current gas year is set at just 2.8 Bcm.

"In spite of the pressure to change course due to the energy crisis triggered by Russia's invasion of Ukraine, the government has repeatedly said production could only be resumed as a last resort if gas supplies for Dutch households run out," the EC said.

"The field is expected to be kept operational at least until April 2023, and the production will come to a definitive end in 2023 and in 2024 at the latest."

In Romania, the second biggest gas producer in the EU, production fell by 5% to 2.1 Bcm in Q2.

However, given the high gas prices, production rose in a number of smaller EU countries including Italy (12%) and Germany (4%).

In the first half of 2022, gas production in the EU amounted to 25.1 Bcm, down from 26.1 Bcm -- or 6% -- year on year.

Import rise

Despite the sharp fall in consumption, EU gas imports rose 3% to 94 Bcm in Q2 as member states rushed to fill their gas storage sites, the EC said.

Among the biggest importers, Dutch net imports rose by 58%, in France by 3%, in Spain by 2%, and in Germany by 1%.

Germany was the biggest net importer in Q2 with volumes at 22 Bcm, followed by Italy (18 Bcm), France (11 Bcm), Spain (8 Bcm), the Netherlands (7 Bcm), and Poland and Belgium (both 4 Bcm).

"These seven countries altogether imported 74 Bcm out of the total gas imports of 94 Bcm in Q2," the EC said.

In the first half of 2022, the EU imported 182 Bcm of gas, up from 170 Bcm in the same period of 2021.

Some 66% of the EU's imports were delivered by pipeline, with 34% through LNG terminals, the same market shares as in Q1.

"In Q2, the share of LNG remained close to 34% -- similar to the previous quarter -- in total EU gas imports, up by eight percentage points compared to Q2 2021, prompting LNG as an individual supply source to the top position of EU gas imports," the EC said.

It said the high LNG imports were mostly a result of the price premium in Europe compared to Asian markets.

The EC said pipeline gas imports from Russia saw a steep year-on-year fall of 45% in Q2, with June imports down by 61% year on year.

"The share of Russian pipeline gas in the EU external gas imports fell below 23% in Q2 2022," it said. "By August, Russian pipeline gas ensured barely one tenth of the EU gas imports."