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Here’s a very detailed article I find convincing, and it helps explain a lot. It’s by Vitaly Yermakov, Senior Research Fellow at the Oxford Institute for Energy Studies, though it is his personal ‘comment’ and not necessarily the position of the Institute as a whole:
The main points as I see them are that the major ‘supergiant’ Russian gas fields first tapped in the Soviet era are in terminal decline due to depletion; their output has fallen and cannot be increased. Other supergiant fields in Russia have started to be tapped, but they are further north and more remote, in colder, more challenging conditions. This means that the gas has to be pumped further, and the infrastructure to link into existing southern pipelines to Europe is still being expanded. From the conclusion:
– The big bounce in Russian gas production in 2021 has proven to be insufficient to meet the simultaneous spikes in demand at home and abroad. Russian gas output has risen robustly and has been close to its maximum productive capacities but the necessity to fill the depleted domestic gas storage facilities in [the third quarter of] 2021 limited the availability of Russian gas for Europe when it was most needed. The market tightness in Europe stems from a combination of demand-side factors such as weather and economic recovery, alongside supply-side factors including declining indigenous European gas production and reduced supply from other exporters of gas to Europe (except for Algeria), including [liquefied natural gas].
– Russia is not running out gas and its prolific gas reserves allow Russia to meet much higher overall demand, but this requires time, money, and contractual assurances of offtake. In addition, the geography of Russia’s future spare productive capacity has changed: a lot of new reserves are available and ready for development on the Yamal peninsula, whereas legacy production in the NPT (the old Soviet-era fields) is declining. This tectonic shift in Russia’s production base has been accompanied by a change in the configuration of the gas transportation system and gas flows within Russia and abroad. And given the regulatory uncertainty around utilization rates on Nord Stream 2, Gazprom seems to be reluctant to add new productive capacities on the Yamal Peninsula proactively for fear of idling the investments.
– Will 2021 with its energy insecurity and record gas prices in Europe be a harbinger of things to come? Will higher gas prices lead European power plants to switch back to coal, resulting in a setback for European climate policies? Or will 2021 have been a perfect storm that will not be repeated? To be sure, the start-up of Nord Stream 2 could lead to higher Russian gas flows into Europe if the regulatory hurdles are overcome, but the ramp up of flows along this line is going to take time and the initial volumes this year, as Gazprom indicated, cannot exceed around 5 Bcm, even if Gazprom receives all necessary regulatory approvals in record time. This is not sufficient to turn the tide, and the fundamentals indicate extremely tight gas markets in Europe this winter.