Gas for $4,000: another Kremlin’s blackmail, or the winter reality?

August 19, 2022

Russia seeks to intimidate European politicians, because, according to experts, there are no objective reasons for an extraordinary increase in gas prices 

This week, the price of natural gas at European hubs exceeded $2.500 per thousand cubic meters. Previously, gas was traded for more than $2,600 in Europe only at the beginning of March: on March 7, the price of April futures reached $3,898.

Meanwhile, the Russian gas industry is scaring European consumers: next winter, it will exceed $4,000! And we are not talking about occasional operations, like last spring, but about a trend for a fairly long period.

We all are aware that there will be no cheap gas in the near future. But is there a real threat of such a huge hike, or it is yet another intimidation by the aggressor state, for whom energy has always been a tool of pressure on Europe? Are Ukraine and the Europeans immune to Putin's gas pressure?

Razumkov Centre energy expert Maksym Bielawski shared his thoughts on the subject.

European Union: some are scared, begging for the launch of Nord Stream-2

Gas prices in Europe rose sharply, primarily due to new restrictions on the Russian fuel supply via the Nord Stream gas pipeline (formally — due to the shutdown of another turbine). Nord Stream-1 is now used by only 20%, which is not enough.

The situation is further aggravated by technical problems at Gazprom's competitors: on August 13, some capacities of the Norwegian Troll field and Kollsnes gas processing plant were stopped for annual maintenance. Until the end of August, the market will be short of 20 million cubic meters of gas. Deliveries of US liquefied gas to Europe may also fall due to the hurricane season in the Gulf of Mexico.

In order to feel confident in winter, it is necessary to buy at least another 23 BCM.

Maksym Bielawski calls the current destabilisation of prices in the European gas market an element of sabotage on the part of Gazprom. ""Scarecrows" about $4,000 per thousand cubic meters is an element of intimidation to force political circles — first of all, German — to launch Nord Stream- 2. If this plan fails, the goal is to cause a recession of the German economy in order to weaken the financial and technical capabilities of Ukraine's allies," Bielawski concludes in a comment for Ukrinform.

The Bundestag vice speaker Wolfgang Kubiki from the Free Democratic Party, a member of the ruling German coalition, calls to start operation of the Nord Stream 2 gas pipeline. "We should launch Nord Stream-2 as soon as possible to fill the gas storages for the winter. If we get more gas in this way — perhaps even the entire amount guaranteed by the contract — it will help people not freeze in winter, and our industry will not suffer serious damage. As soon as gas storage tanks are filled, we can close Nord Stream 2 again," says Kubiki.

However, it is clear that Nord Stream-2 operation for 2 or 3 months will not suit Putin. As soon as negotiations begin, Moscow will do everything to ensure continuous operation of the pipeline.

Gazprom is already "tightening the screws." On Friday evening, the Russian monopolist announced complete suspension of gas pumping to Europe through Nord Stream-1 from August 31 for three days — allegedly due to the need to repair the only working turbine. Maksym Bielawski predicts the repetition of such a "show" once every six months.

Europe: in search of an alternative to the Russian "gas needle"

The European Commission should recommend to the governments of the countries of the Austro-German trade zone to introduce a price cap on the gas market, Maksym Bielawski says. And, of course, Europeans should not forget about the alternatives. The European Union already seeks to minimise the risks of complete cessation of Russian gas supplies during the heating season.

"First of all, Europe is reducing gas consumption. The announced plan is to reduce demand by 15%. According to my calculations, this is enough to do without Russian fuel. Instead, the volumes of gas supplies from the North African countries, gas from Norway and the North Sea, including Great Britain, should be preserved. In general, I do not see a problem of gas shortage on the European market. I am convinced that the EU will pass the heating season without any particular problems", — says Bielawski.

Analysing the situation in the adjacent energy markets in Europe, the expert draws attention to de-conservation of coal-powered plants. The same applies to the nuclear energy facilities.

Energy efficiency measures are also being implemented in Europe. In Germany, they are modernising thermal power plants and the heating infrastructure.

Experts predict an increase in the share of renewable energy sources in the energy balance, first of all, geothermal energy. This technology has proven itself in the northern Norway and Finland. Now, it is being implemented in northern Germany, France and the Netherlands.

Ukraine: the promised 19 BCM of gas will not be available in gas storages?

We were quite upset this week: according to Naftogaz CEO Yuriy Vitrenko, it will hardly manage to accumulate 19 BCM of fuel in underground storages before the heating season, as required by the government, due to the lack of funds for imports and technological limitations. "There is a theoretical possibility, but there is no practical one," Vitrenko says. Ukrainian storages now contain 12.3 BCM of gas. 4.5 BCM need to be imported.

Apparently, we will be partly helped by the targeted funding of 450 million Canadian dollars for the purchase of gas, but it will be enough to buy only 138 million cubic meters. To buy the required 4.5 BCM, more than $11 billion is needed.

"I believe that in the conditions of the information war and the current situation in the country, such assessments of the head of Naftogaz are inappropriate. During the war, it is better not to comment on whether or not we will be able to accumulate the necessary resources before winter. This information can be used against Ukraine," Maksym Bielawski says.

Despite everything, according to his estimates, the country is preparing for the heating season better than in previous years. We can accumulate approximately 14 BCM of gas by the end of autumn. "This will be enough to start the heating season. In addition, we have actually accomplished the plan of coal storage before winter. More than 1.8 million tons are stored at coal yards — much more than last year. The task is to have 2.3 million tons before the heating season. The only question is what the situation will be like on the battlefields, how the railway infrastructure, used, among other things, to transport fuel from mining regions, will work," the expert says.

The Russian Federation has been repeatedly shelling critical civilian facilities, including energy and railway.

"In general, I expect an optimistic scenario — given the current situation at the fronts, strengthening of our military potential. I believe that we will not even have to use emergency power systems and generators in non-frontline regions, which are being purchased now. I don't expect any particular problems with the supply of petroleum products for generators. Currently, the situation on the domestic petroleum product market is stabilising. In recent days, prices in the retail segment have decreased, following oil quotations on world markets. Oil prices will most likely continue to decline andin the next two months may drop to $78–82 per barrel," Bielawski predicts.

There are no problems with petroleum products on the European market. This gives hope that, if necessary, Ukraine will buy diesel fuel and petrol from its European neighbours.

The partners may help us with electricity. "From October, Ukraine will most likely have to limit electricity exports. In certain hours, it will even need to be imported from the EU. I don't see any risks of loss of the network frequency. The operation of the power system is quite stable. It is practically impossible to disable it. Even taking into account the war factor," Bielawski is convinced.

"I believe that the statements of the former head of Naftogaz, Andriy Kobolev, regarding the transfer of the heating system in high-rise buildings to electricity are technically illiterate. Our housing stock is outdated, energy distribution networks were not replaced and are very sensitive to additional load. This means not only the risk of emergency shutdown of power supply, but also the threat of fires and fatalities," says Maksym Bielawski. 


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Maksym Bielawski

Leading Expert, Energy Programmes

Born in 1986 in Zhytomyr oblast


Zhytomyr State Technological University (2008)

Ph.D in Technical Science (2010)

Ivano-Frankivsk National Technical University of Oil and Gas (2012)

Author of 17 patents and 100 scientific works

Work Experience:

2008 – 2011 — Operator of Gas Infrastructure Units, Controller of Gas Transmission System in Rivne Division of PJSC "Ukrtransgas"

2011 – 2017 — Leading Engineer, Deputy Head of Press-Service, Head of Public Relation Department of PJSC "Ukrtransgas"

2017 – 2018 — HR Director of PJSC "Maine Gas Pipelines of Ukraine", Advisor to the Minister of Energy and Coal Industry of Ukraine

2021 — Director of Integrated Communications of NJSC "Naftogaz of Ukraine"