Global Energy Watch| Europe seeks to get more natural gas from outside Russia What are the prospects for diversifying its energy supply?

21st Century Business Herald reporter Wu Bin Shanghai report At a time when the Russian-Ukrainian issue remains unresolved, Europe is trying to diversify its sources of natural gas.

It should be noted that about 40% of Europe's natural gas supply comes from Russia, and although European gas prices have reached new highs and demand is huge, Gazprom has basically not increased its gas supply to Europe. On the other hand, the United States and Europe are beginning to look globally for alternative natural gas supplies, trying to ensure that Europe does not experience energy shortages.

On February 9, Japan's Minister of Economy, Trade and Industry Koichi Hagida said the Japanese government had decided to allocate some liquefied natural gas (LNG) to Europe after the United States called on Japan, India and other countries to provide energy assistance to Europe. However, Japan's LNG is also basically imported, so it can only assist Europe if domestic needs are met.

Brian Deese, director of the White House National Economic Council, said the U.S. government is working with partners to increase energy supplies to Europe.

At a time when the situation in Ukraine was tense, the price of natural gas in Europe soared. How will the Russian-Ukrainian conflict evolve in the future? Where will Europe's energy diversification path go?

The Russian-Ukrainian issue is still expected to be resolved peacefully

Judging from the recent development trend, the Russian-Ukrainian issue is still expected to be resolved peacefully in the future.

German Chancellor Scholz held a meeting in Berlin on the 8th with visiting French President Emmanuel Macron and Polish President Duda to discuss measures to cool the situation in Russia and Ukraine, and all three stressed the need to "avoid war in Europe" . US President Joe Biden has also stressed that he prefers to resolve the conflict through diplomatic means.

In addition, Russian President Vladimir Putin also expressed the hope that the situation in Ukraine can finally be resolved peacefully, and he believes that there is no other option to resolve the conflict in eastern Ukraine other than the existing Minsk peace agreement. Putin said Russia would make every effort to find a compromise for everyone on Europe's security issues.

Zhao Wei, chief economist of Guojin Securities, told the 21st Century Business Herald that the Russian-Ukrainian conflict stemmed from US Defense Secretary Austin's visit to Ukraine in October last year and said that he supported Ukraine's accession to NATO, and the fundamental reason was that NATO squeezed Russia's living space and involved a tripartite game between the United States, Europe and Russia. Ukraine is the last barrier between Russia and NATO, and if Ukraine falls to the West, Russia's strategic living space will be significantly compressed. In the face of unfavorable domestic progress, the Biden administration attracted votes for the midterm elections at the end of the year, hoping to gain more support through diplomacy.

Regarding the prospects of the situation in Russia and Ukraine, Zhao Wei said that the probability of an all-round military conflict between Russia and Ukraine in the future is not high. Russia's intention was to peacefully resolve ukraine by building a new architecture, and the Ukrainian government has realized that the cost of full-fledged investment in the United States is becoming increasingly high. For the United States, the cost of full military support for the Ukrainian conflict is prohibitive. From the perspective of Europe, Germany, France and other countries prefer to solve the Ukrainian crisis by peaceful means.

The prospects for diversification of the EU's energy supply are geometric

Regardless of how the situation in Russia and Ukraine evolves in the future, it is crucial for the EU to diversify its sources of natural gas. The European economy is heavily dependent on Russian energy supplies, and both the EU and the United States want To diversify Europe's energy supply.

Given the recent continued tensions in Ukraine's border region, the EU is concerned about Russia's gas supply. On Feb. 7, European Commission President von der Leyen said he was in talks with countries such as the United States and Norway to increase gas supplies to Europe to ensure more sources of gas supply.

At the same time, the United States has approached Japan, India and other countries, and if an emergency occurs, it hopes that Japan and India will ship fuel to Europe. In addition, the United States is negotiating with natural gas producers in Qatar, Nigeria, Egypt, Libya and other countries to explore the possibility of increasing production in emergencies.

On February 7, local time, at the EU and US Energy Council in Washington, the EU and the US said that the two sides will work together to enable the global LNG market to provide additional and diversified supply.

In the short term, however, large quantities of natural gas from Russia cannot be replaced. Unlike the oil market, the global natural gas market has almost no spare capacity, and no producer can significantly increase production in a short period of time. Therefore, if some natural gas producers increase their supply to Europe, it will inevitably come at the cost of reducing supply in other regions.

Qatar, for example, is one of the world's largest producers of LNG, with its LNG capacity already operating at full capacity and about three-quarters of Qatar's exports going to energy-poor Asian countries such as Japan and South Korea. At a time of tight global gas supply, Qatar Energy, the world's largest LNG exporter, has been locked into long-term supply contracts that cannot be easily terminated.

In response, Qatar's Minister of State for Energy, Saad Al-Qabi, said Qatar would struggle to meet all of the EU's needs for natural gas without disrupting supplies to the rest of the world. In recent years, there has been a shortage of funds in the global oil and gas sector, while the global demand for energy has been growing. He called on all gas suppliers to work together to increase investment in oil and gas to ensure energy security.

Zhu Runmin, a senior economist in the oil industry, analyzed to the 21st Century Business Herald reporter that it is difficult to find or even almost impossible to replace Russian natural gas in a short period of time, but it should still be possible to do it in time. The United States, Australia and other regions can supply a part, and Europe can increase production by increasing investment in natural gas, as well as regulating demand through market mechanisms.

Zhu Also said the United States would have some effect in negotiating with other countries to increase natural gas supplies to Europe. If there is enough time, Europe's gas dilemma is not a problem, the current problem is that time is too rushed.

In addition, Markus Krebber, CEO of RWE AG, one of Germany's largest utilities, also admitted that in the short term, "we can't get rid of our dependence on Russian gas."

Looking forward to the future, Wang Chengqiang, director of the New Era Futures Research Institute, told the 21st Century Business Herald that Russia has the geographical location advantage across the Eurasian continent, is a core country for natural gas exports, and has a decisive impact on the EU's energy supply. Given energy security, the EU's options for importing gas will tend to diversify, but getting more gas outside of Russia will take more time to operate and will be challenging in the short term.

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