Deputy Prime Minister Novak: Long-term contracts are needed to increase gas supplies to the EU
Alexander Novak. Photo: Evgenia Novozhenina / Reuters
Russian Deputy Prime Minister Alexander Novak commented on the situation with gas in Europe and named the main reasons due to which high prices for this type of fuel have been established in the region. He told about this in an interview with RBC.
Causes of the gas crisis
Novak noted that several factors influenced the gas crisis in Europe, including the deliberate refusal of the European Commission from long-term contracts in favor of spot contracts, the cold winter of last year and the risks of a recurrence of cold weather this winter. Novak explained that the spot assumes the satisfaction of bids in the near future and does not allow predicting the mid-term and long-term prospects in the market. As a result, in the summer of 2021, European countries were faced with a situation where they were unable to fill storage facilities, as gas went to economically more favorable markets.
The deputy prime minister also added that Europe has begun to produce less of its own gas, thereby refusing long-term investments in the industry. In addition, banks are advised not to finance traditional hydrocarbon projects, including oil and gas production. Due to the fact that the development of new fields is not underway, an even greater gas shortage should be expected in the future, he explained.
Supplies can be increased
In an interview, Novak announced Russia's readiness to increase gas supplies to Europe. He stressed that the country has a resource base that will meet the demand of European countries in any volume.
At the same time, the Deputy Prime Minister stressed that this requires long-term contracts. This is due to the fact that in order to increase production, large investments are required, which should pay off in a long period.
But, of course, this is not a quick process, because the policy that was carried out in the EU was aimed at reducing demand.
Alexander Novakwitse-Prime Minister of Russia
Nord Stream 2 certification
In addition, in an interview, the Deputy Prime Minister called the end of the first half of 2022 the maximum deadline for completing the certification of the Nord Stream 2 gas pipeline. At the same time, he noted that, if the European colleagues so desire, deliveries can begin earlier than the middle of the year.
According to him, Moscow also hopes that Europe will not put forward new requirements for the launch of the project. However, no one is immune from this, Novak added.
No drop in prices is foreseen
In an interview, Novak found it difficult to answer when gas prices in Europe will fall, since the supply must be sufficient for this. He noted that reserves must be created in underground storage facilities, necessary in order to “reliably pass the winter period.” According to his forecast, this year world oil demand will grow by 4.5-5 million barrels per day, and next year it will increase by about 4 million more.
Earlier, Novak said that the cost of gas in Europe in 2022 will remain at high levels. At the same time, he stressed that Russia has always adhered to the position that long-term gas contracts are the most reasonable solution.
Gas reserves in Europe have depleted after the Russian supplier stopped booking additional capacities for gas transit via the Yamal-Europe gas pipeline to Germany from 21 December. According to Gazprom, European buyers do not make bids themselves. As a result, the cost of fuel in the region at the end of December set another historical maximum.
2187 dollars per thousand cubic meters – the historical maximum of gas prices in Europe
