Our starting point for considering gas demand in the European Union in 2023 is consumption in 2022 (360 bcm). This is adjusted for weather, the drop in gas use in industry caused by demand destruction, and the need for additional gas exports to Ukraine and Moldova. This provides the baseline level of demand for the estimate of the supply‑demand gap in 2023.

We assume that Europe’s gas storages will be around one-third full at the beginning of April 2023, which translates into storage injection needs of 65 bcm over the summer in 2023 to reach a storage level of 95% at the start of the 2023-24 heating season.

Temperature adjustment

Mild weather in 2022 meant that Heating Degree Days in the first eleven months of 2022 were around 7% lower than the average from 2017-2021. If the number of Heating Degree Days returns to the 2017-2021 average in 2023, this would require 11 bcm of additional gas.

Avoided industry demand destruction

Industrial gas demand is set to be around 20% (or 25 bcm) lower in 2022 than in 2021. We estimate that fuel switching, mainly gas-to-oil, accounts for just under half of this reduction and there are also set to be some efficiency gains. Around 10 bcm of the remaining reduction stems from production curtailments, primarily in the gas- and energy-intensive industries.

The fertiliser industry accounts for more than half of these production curtailments. According to the International Fertiliser Association, around 70% of the EU’s ammonia production capacity was offline in August 2022 and around 40% had still not restarted in October 2022. There have also been production curtailments in the steel and aluminium sectors, where high gas and electricity prices led to a 10% drop in production in the ten first months of 2022 compared with the same period in 2021. There was also less natural gas consumed in cement, glass, ceramics, food and machinery production, although most of this was because of efficiency improvements and fuel switching.

The actions presented in this report aim to provide sufficient natural gas to avoid the need for curtailments in industry in 2023.

Exports to Ukraine and Moldova

The European Union can play a crucial role in refilling gas storage sites in Ukraine and ensuring supply to Moldova. Ukraine’s gas storage levels were 14.6 bcm at the beginning of the 2022‑23 heating season (against an initial target of 19 bcm). Even with a 25% reduction in the Ukraine’s winter gas consumption compared with pre-war levels, storage sites are expected to be severely depleted by the end of March 2023. If there is a full cessation in Russian piped gas supplies, Ukraine and Moldova will require around 12 bcm of gas imports from the European Union during the summer of 2023 to replenish their storage sites by the start of the 2023-24 heating season.

Russian pipeline supply

Our assumption in this report is that Russian pipeline deliveries to the European Union fall to zero from the beginning of January 2023. If they were to remain at their current levels, then Russia would supply around 25 bcm over the course of 2023. This is less than half the 60 bcm that is likely to be delivered in the whole of 2022, which in turn is less than half the amount supplied in 2021.

Non-Russian pipeline supply

Non-Russian pipeline suppliers have limited upside potential, with both Azerbaijan and Norway supplying close to their nameplate capacity in 2022. In the case of Algeria, some limited upside is expected with the development of gas fields in the Berkine South basin. Altogether, non-Russian pipeline deliveries are expected to increase by less than 1% (or 1 bcm) in 2023 compared to the previous year. Net pipeline imports from the United Kingdom are assumed to remain close to levels in 2022.

LNG supply

The European Union imported just over 130 bcm of LNG in 2022, a 60% increase from the 80 bcm imported in 2021.

Global LNG supply is expected to increase by 23 bcm in 2023, largely due to the ramp‑up of liquefaction projects in Africa and the United States. Europe will be able to receive additional LNG as it expands its regasification capacity, but the availability of LNG cargoes to utilise this capacity is a function not only of additional LNG supply but also of demand from other importers.

Asian LNG imports are set to fall by 7% in 2022, largely as a result of lower LNG import requirements in China (which fell by around 20% or 20 bcm). A return to stronger economic growth and eased covid restrictions could support the recovery of China’s LNG imports in 2023, to close to their 2021 levels.

China is less reliant than the European Union on LNG cargoes sold on spot markets and the spot market. China is set to increase its level of destination-fixed contracts in 2023. If China’s LNG imports recover to their 2021 levels, it would capture most of the overall increase in global LNG supply in 2023 and limit the LNG volumes available to the European market. Under this assumption, we estimate that the European Union could increase its LNG imports by around 7 bcm in 2023.

There are some short lead-time options that could boost the availability of LNG supply globally in 2023 above the 23 bcm assumed here. This includes improving the supply of feedstock gas to existing LNG plants and developing new small-scale, floating LNG (FLNG) liquefaction plants. Several small-scale FLNG projects are in various stages of development, primarily in Africa and the United States. Many of these projects still require regulatory approvals, need to secure feedstock gas supplies, and are subject to pending investment decisions. We estimate that the development of small‑scale LNG projects and the improved availability of feedstock gas to existing facilities could result in an additional 10 bcm of LNG supply in 2023. Conversely, unplanned outages could limit the growth in new LNG supply to well below 20 bcm in 2023. The possibility of unexpected outages is heightened by high utilisation levels of available capacity in recent years, alongside postponed maintenance at some facilities.

Gas production in the European Union

Natural gas production in the European Union fell by around 9% (or 3.6 bcm) in the first nine months of 2022. This stemmed mainly from reductions in the Netherlands, the European Union’s largest gas producer. Gas production at the Groningen field in the Netherlands fell by more than one-third (or 2 bcm) in the first nine months of 2022. Non-Groningen gas production in the Netherlands continued to decline as well, down by 10% compared with last year. In other markets, domestic production remained either flat or fell slightly.

We assume that natural gas output in the European Union will decline by around 5% in 2023. Groningen gas production has been capped at 2.8 bcm for the Gas Year 2022/23 (down from 4.5 bcm during the previous Gas Year) and extraction at the field is due to cease completely by 2024 at the latest. The available technical production capacity at Groningen could play a role in easing supply-demand tensions prevailing in Europe and on the global LNG market. However, raising output remains a measure of last resort due to the risk of earthquakes caused by gas production at the field. By 1 April 2023 the Netherlands will decide whether to close additional production sites at the Groningen field, further reducing its technical capacity.

In Romania, natural gas production is set to increase from the Midia Gas Development project and from the Doina and Ana offshore fields, which started up in June. With an estimated 10 bcm of gas reserves, Midia will be providing 0.5 bcm in 2022 and 1 bcm a year during 2023-2026 –offsetting the declines from more mature fields.

In Denmark, the return of the Tyra field was delayed into late 2023 or early 2024. The field was in redevelopment since 2018 and will supply 2.8 bcm each year to the European market once operational.

There is set to be around 4 bcm of biomethane produced in the European Union in 2022. This includes the contribution of more than 150 additional plants commissioned in 2022, which are expected to have increased production by just under 1 bcm; 80% of the capacity additions were in France.