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Europe should unite on buying gas, says IEA

European countries would improve their negotiating position on gas prices if they came together around a common purchasing mechanism, believes the Director General of the International Energy Agency (IEA).

“I think it’s a very good idea,” Fatih Birol told Sándor Zsiros during the Global Conversation. “If European countries come together and build their muscles even further and emerge as strong buyers. That will help them outpace some of the other LNG buyers.”

But Birol said price caps would only be useful if they didn’t harm Europe’s competitiveness in the market.

“One of the reasons we in Europe have been successful this year is that we paid more money than other buyers and we were able to bring the LNG here,” he said. . “If we set the price cap too low, then our competitive power will be much less. Therefore, setting a price cap that is good enough to compete with other buyers but must at the same time protect consumers would be a good idea.”

The IEA is an intergovernmental organization that provides policy recommendations, analysis and data on the energy sector.

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Sandor Zsiros, Euronews: First of all, I would like to know your opinion on the energy crisis in Europe, because many people would like to know if the end of this crisis is imminent or not. So what is your opinion?

Fatih Birol, Director General, International Energy Agency: So we are in the midst of the world’s first real energy crisis. Our world has never, ever experienced an energy crisis of such magnitude and complexity. The reason is very simple. Russia, the country that invaded Ukraine, is the largest energy exporter in the world. And this invasion of Russia triggered a major energy crisis. And Europe is the epicenter because a large part of Europe’s energy comes from Russia. This is the mistake that Europe has made for years and years, decades and decades, depending so much on Russian energy. One country. And therefore, we are going through difficult times in Europe. And I guess for a few years we will have tough times in terms of economy and energy. And I suspect it will also have implications for our social life.

Supply forecasts for the coming winters

SZ: What are your predictions for this winter? How will we spend this winter?

FB: I think we can get through this winter if the winter is not too long and not too cold. And if there are no major surprises, a pipeline explodes, a fire here and there. Barring such unexpected surprises, we may weather this winter with a few economic and social bruises here and there. We will arrive in February and March without major problems. Because we have been able, thanks to the policies of European governments, to put a lot of natural gas in our storage. We will be using it this winter. But the question is that next winter may be even more difficult than this winter, because when we arrive in February or March next year, how are we going to fill our gas storage again? It’s a big question. Because market conditions will not be easy.

SZ: So how are we going to replace this missing gas? Is there enough LNG capacity to replace this gas?

FB: Next year, China can rise, the economy can rebound, and we won’t get Russian gas. Also, the bad news is that next year the amount of new gas capacity, LNG capacity, that will come to market is very, very limited. So putting these three things together: no more Russian gas coming into Europe, China may also need a lot of gas from global markets and very little new gas capacity from the US and elsewhere, this means that it will be very tight for Europe and for the rest of the world.

Price volatility set to continue

SZ: So do we have to get used to high energy prices in the long term?

FB: I think in the next few years we have to be ready for volatile and high energy prices and we have to find solutions. But to be very frank, this winter is difficult and next winter could be even more so.

SZ: The European Council therefore wishes to introduce a kind of flexible gas price cap. Do you think that would help the situation?

FB: One of the reasons we in Europe have been successful this year is that we paid more money than other buyers and were able to get the LNG here. If we set the price cap too low, our competitive power will be much less. Therefore, it would be wise to set a ceiling price sufficient to compete with other buyers while protecting consumers.

SZ: So there is also another idea, a small-scale joint purchasing mechanism. How do you see this?

FB: I think it’s a very good idea. If European countries unite and further strengthen their muscles and emerge as strong buyers, it will help them to overtake some of the other LNG buyers.

Driving the push for clean energy

SZ: What will Russia’s position be in the future of oil markets?

FB: Russia will lose in this energy battle for the following reason. Just before the invasion, about 75% of total Russian gas exports went to Europe and 55% of Russian oil exports went to Europe. And Europe was by far the biggest market, Russia’s biggest customer. And Russia has lost its customer forever, the biggest customer.

SZ: The Russians say they can sell their gas to Asia, to China.

FB: It is not easy. You can’t just quickly build pipelines to China or India. It will take in the most optimistic case ten years to build these pipelines. To navigate this geography, you need a lot of new technology, funding, etc. So you don’t sell onions on the market. Selling natural gas is a different business. So for Russia to replace its natural gas exports to Europe with Russia is, in my view, a pipe dream in the short term.

SZ: So Europe loses, Russia loses on this crisis and who wins?

FB: I would say that Europe and the rest of the world are definitely going through a very difficult time. But we must not forget that in many countries around the world, many governments are providing strong responses to this crisis. In Europe, we have REpower EU, a major program, which invests a lot of money to accelerate clean energy. It’s onshore wind, offshore wind. It’s heat pumps, it’s hydrogen. These are not declarations or strategies, this is money on the table: for solar, wind, nuclear and electric cars. They will come in a few years. And I believe that this crisis could well be a turning point in history for the acceleration of the clean energy transition. We’re going to go through a few tough years, but at the end of the day, ten years from now, when we look back, we can see the year 2022 as the year when the clean energy transition started to accelerate strongly in the world .

euronews Gt

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