Acvian presents you an overview of a unique European energy crisis where most see the lack of perspective, but we propose employers to see what horizons are open now for the energy industry to take on the lack of natural resources in Europe.

How European energy crisis began and its current specifics


Russia continues to trade oil and oil products in near-pre-war volumes and at pre-war prices, albeit 20% cheaper than other sellers. A European embargo on the purchase of oil and a ban on shipping insurance will come into effect in December. Still, exceptions to these measures in case of sale at prices below the ceiling are already being discussed. In the September communique of the G7 finance ministers, it was noted that a significant reduction in Russian oil exports would lead to higher prices and worsen the situation in the global economy. Whether it will be possible to implement price controls is a separate question, and there is no answer yet.


Eropean energy crisis

According to IMF


But more dramatic events are unfolding in the gas market. Russia has consistently reduced gas supplies to Europe using a variety of mechanisms and formal reasons. Some of these actions had the character of somewhat probability, but all together, they formed a clear picture, confirmed by the statements of Vladimir Putin at the Eastern Economic Forum – this was a response to European sanctions and arms supplies to Ukraine. The intrigue ended on September 26 with explosions on three of the four Nord Stream pipelines, which made a quick restoration of supplies along the Baltic route impossible not only for commercial and political but also for material reasons.


Challenge is a new opportunity


However, the prospects for the European winter 2022/2023 may look better than might have been suggested in the spring. Gas storages are almost complete – Europe has managed to attract LNG supplies from practically all over the world. The economic cost of these actions turned out to be extremely high, gas prices at times were 15 times higher than the average before 2019, but a significant gas shortage can be avoided. Nonetheless, some administrative measures will be needed – from temporary stopping supplies to industrial enterprises to legislative bans on powerful heating. They are already being implemented – for example, in Germany, priority lists are being drawn up for shutting down enterprises.


Gas and European energy crisis will be unevenly distributed across the region: some countries will have to make small consumption reductions, and others will have to change their lifestyle significantly. There will be countries with low reserves, dependent on transit through states stuck in better but also tricky situations.


The difference of 115 billion cubic meters will be a net decrease in the global gas balance; these volumes of Russian gas cannot go anywhere else. At the same time, significant new sources of gasoline will only appear on the international market in 2024-2025, when LNG plants under construction in the United States start to work. Thus, for the next two or three years, Europe and the world are facing the prospect of a gas deficit. The LNG industry has seen a significant revival in the past few years, with several substantial projects launched in the US, Canada, and Qatar; smaller ones in Mozambique, Congo, and Indonesia.


At least until 2025, the world will face a significant gas shortage. Projects that start after the date will ease this scarcity but not create abundance: they were designed to increase demand, not to compensate for falling Russian gas volumes. Projects launching urgently in 2022-2023 will significantly impact the market, although only after some time.


In finding of new sources for gas


Norway, a wealthy neighbor, might help European energy crisis. The Nordic country, a steadfast NATO ally and a member of the European Free Trade Association may be open to gas price reductions for energy-strapped European countries, according to Prime Minister Jonas Gahr Store. It’s a wise approach because giving a discount is more significant than its actual size. Easing Europe’s financial hardship will eventually pay off in other ways.


Baltic Pipe Employment Europe PEO

Baltic Pipe under construction


Norway has a tied-up relationship with the EU despite not being a member, thanks to the European Economic Area (EEA) Agreement and numerous other pacts. As part of a partnership built on “shared fundamental principles and backed by our common heritage and history, as well as strong cultural and geographical linkages,” the EU and Norway actively cooperate on foreign and security policy matters. These elements give Norway a distinct edge over other producers that the EU is turning to lessen its reliance on Russian oil and gas. Europe is an important market for Norwegian oil and gas due to its location; in 2021, it accounted for roughly 71% of Norway’s oil sales and almost 100% of its gas exports.


Norwegian gas usually travels mostly through pipelines and is focused in Western Europe. Five gas pipelines with a total annual export capacity of more than 131 billion cubic meters link the Nordic nation to continental Europe, and two connect to the United Kingdom.


However, Norway has invaded the ‘traditional’ territory of Russia, whose gas exports to Europe are primarily concentrated in Central and Southeast Europe, with the Baltic Pipe under completion, which will bring gas to Poland via Denmark. Poland will receive ten bcm of gas per year from the project or almost half of what the nation needs. From the last quarter of 2022, the pipeline will be entirely operating, lessening the impact of Russia’s April gas supply cutoff to Poland.


Economists say: ‘be innovative in crisis’


Despite the fact that there isn’t a “one size fits all” answer to lessen the effects of natural gas shortages, Roland Berger’s cross-functional experts have created a solid framework based on extensive knowledge of the industry and seasoned expertise in managing risk and supply chain management. Corporate leaders are well-prepared to deal with this issue under the framework of quick decisions, tried-and-true execution techniques, and regular monitoring.


Over half a billion individuals across the continent may face a severe problem due to European energy crisis. However, the region may not run out of natural gas in the upcoming year if businesses and consumers continue to employ all available tools to reduce gas demand and make innovative use of gas storage facilities. But by 2023, storage will be substantially exhausted, so the region must start taking mitigating measures now and consider its future energy needs. 


How to use the European energy crisis


The global business now opens a specter of possibilities to expand internationally, especially for companies in the gas-oil field who can take advantage of petrol shortages in big European economies. To grow your business, your team should increase as well. Hiring talents globally in complicated circumstances given by EU legislation may be challenging, not to mention opening your legal entity. To significantly ease the process for employers, Acvian proposes services as PEO and EOR providers. We take all the complications in global hiring ourselves and let you do business fast and efficiently. For a detailed conversation, book an instant meeting or leave your contacts, and we will get in touch.

Author: Nikita Semenov