Will the reduction in gas demand in the EU be prolonged?

European Commission announces extension of emergency gas demand reduction regulation for another year

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An extension of the reduction of gas demand in the EU has been proposed by the European Commission. This emergency legislation is designed to reduce gas demand by 15% for one more year, until March 2024. Energy ministers will discuss today’s proposal under Article 122 of the Treaty at the Transport, Telecommunications and Energy Council (TTE) on 28 March. This decision comes at a time when global gas markets remain tight. The reasons are various factors such as weather conditions, global LNG demand and macroeconomic conditions.

The EU must continue its efforts to reduce gas demand

The decision to extend the emergency regulation is based on an analysis by the Commission. It shows that in order to fully compensate for the permanent decline in Russian gas, it is necessary to continue to reduce gas demand. This must be done by supplementing the additional LNG and gas pipeline from other countries. In addition, we need to diversify with new renewable capacities installed since the beginning of 2022. Continuing the 15% reduction in April for another year would be sufficient to reach the 90% gas storage fill rate by November 1 and ensure that there are no security of gas supply issues throughout the coming winter.

In addition, according to the European Commissioner for Energy Kadri Simson, the further reduction of gas demand is necessary to compensate for the permanent decline in Russian gas production and to complement new renewable capacity and LNG and pipeline imports from other countries.

Reducing gas consumption will also help maintain current market conditions. The latter would experience lower prices and less volatility than last year. This would limit any possible negative effect on additional volumes imported into Europe. The savings generated by the regulation last July reached 19%, or the equivalent of 41.5 billion cubic meters (bcm), between August 2022 and January 2023.

A change in the gas demand reduction proposal

The proposed extension of the emergency legislation includes one change. The latter concerns the monitoring and reporting of savings data by sector on a monthly basis. This is before a monitoring of the total gas demand every two months. This will help Member States to implement more targeted measures in the future, if necessary.

A different 2023 context

Gas supply problems have been exacerbated over the past year. Indeed, the tensions between Russia and Ukraine, as well as the crisis of Covid-19. have turned the market upside down. However, this year the situation should be different. Russia can no longer militarize energy and introduce uncertainty into the system to the same extent as in 2022. This year, gas storage levels are very high and new infrastructure has increased diversification capacity.

However, global gas markets remain tight due to several factors.

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