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The Shift Project was founded by Jean-Marc Jankovic at an online conference organized by The Shift Project on Tuesday, December 6, 2022. DGRIS (Directorate General for International Relations and Strategy), dependent on the Ministry of Defence, provided an in-depth analysis of the world and European energy situation. And comes to the following conclusion: the energy crisis has just begun, and it will be very, very serious.
More intense supply competition between countries that absolutely need natural gas will play out in the coming years, and indeed from 2023, causing an explosion in demand, and therefore prices, explains Mathieu Ausanno, who now runs The Shift project. Jean-Marc Jancovici directs this exclusive study.
The main problem that Europe faces or is already facing is that the conflict between available natural gas supply and demand will create an inextricable situation in the coming years. Quite simply, Part of the demand cannot be satisfied, resulting in the destruction of this demand, all of which means: permanent closing of factories, heating restrictions, etc.
(Left) In gray, in the upper right of this map, goods were contracted from Russia before the war in Ukraine. In the current state of the global gas market, supplies cannot be changed.
(Right) Evolution of global gas demand from 2022 to 2040, excluding demand.
The energy crisis preceded the war in Ukraine
Even if the conflict in Ukraine ends tomorrow, that’s unlikely for now, and even if Western sanctions are lifted and supplies are allowed to resume. Russian GasIt is impossible to recover the full amount of gas expected in 2023 and beyond. It is certainly the destruction of the Nordstream I and II gas pipelines that prevents a return to “normal” or pre-crisis conditions.
Furthermore, global competition is causing severe inequalities in other parts of the world. If Europe has the financial capacity to buy LNG at any price (x5 minimum), it will lose access to this essential energy resource, starting with developing countries like Bangladesh.
Black is black? However, as new sources of natural gas come to market, there is a small chance, hope. This is especially true for US shale gas, the production of which may increase further. It is also the advent of the LNG market… Qatarwhose gas resources are still at the beginning of their exploitation.
Energy: The EU will enter a zone of terrible turmoil
Unfortunately, however, the EU will enter a very serious risk zone, a great tension in prices at best, an enormous destruction of demand at worst, and the consequences mentioned above will be high. In the first scenario, the most “optimistic”, the EU wins most of the gas order markets globally, excluding Russia, and meets its internal demand, and this at any price.. In the worst-case scenario, the gap between available gas volumes is likely to narrow, and the supply shortfall between demand and demand will be severe. Even the normalization of relations with Russia, which is not on the agenda today, and the forced march to repair Nord Stream I and II, did not allow the EU to promise that it would find the necessary gas under the same financial conditions.
Conversely, a level of gas demand in Europe, and a cut-off in Russian gas supply would result in a completely unacceptable situation, with a 50% gap between available gas supply and demand.
In fact, everything will be in play this winter of 2022. Energy-related tensions will be more acute, requiring urgent measures, starting with decarbonisation measures.. The problem: decarbonization often involves electrification, and electrification requires the rapid construction of controllable production mechanisms, because not everything can be based on renewable energy, wind and solar power alone… However, currently, plans for new nuclear power plants, France alone, do not close their doors before 2035. The first electrons should not be produced.
Suffice it to say that the coming decade is going to be very challenging for energy consuming companies (even Baker!). Along with industry and transportation. Everyone will be greatly affected by this energy crisis that is about to begin.
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