International Energy Agency head warns Europe of next winter

By Burak Bir

LONDON (AA) - The head of the International Energy Agency said Thursday that Europe should not have "overconfidence" about "current achievements" over energy supply, as "nobody can guarantee that next winter will be as mild as this winter."

Speaking at the Committee on Industry, Research, and Energy at European Parliament, Fatih Birol said that although Europe seems "off the hook" for this winter but next winter may be more difficult.

"This winter we were lucky to import a lot of LNG from the markets to replace the Russian pipeline," he said, elaborating that as consumption in China, the top LNG importer, was in decline last year, there was enough LNG in the market for Europe.

Birol went on to say that all the indications show that the Chinese economy is rebounding and its LNG import needs will be increasing, therefore China is coming to LNG markets "as a major, strong buyer."

Another reason why Europe should be more prepared for the next winter, he said, was that the pool of LNG is now insufficient. The amount of new LNG capacity coming to global markets is one of the lowest in the history.

"We had to be realistic here that one of the factors had us this year to go through without major problems is that we had a relatively, more than relatively mild winter. Nobody can guarantee that next winter will be as mild as this winter," he said.

- 'Even today's prices 3 times higher than historical averages of Europe'

"We shouldn't be too relaxed, too overconfident. We should be happy with our achievement, our solidarity, our unity, our pragmatic policies, but get ready for the next winter," added Birol.

Recalling his previous warning that Europe needs to have a new industrial master plan, he stressed that European energy in the future will be more expensive than in the past.

"European industry is based on a model which is basically getting the rather abundant and cheap Russian energy, this is finished. There is no going back," said Birol.

He also stressed that this scenario will put huge pressure on the competitiveness of the European industries as energy is a vital part of the production costs: "Even today's energy prices in Europe are three times higher than the historical averages of Europe."

Pointing out the global developments regarding clean energy technologies, Birol recalled that 75% of batteries today are manufactured in China. In addition, he pointed out that US Inflation Reduction Act (IRA) will also have a negative impact on European industry.

"I believe Europe needs to analyze in the entire supply chain of clean energy that Europe can have a competitive edge and what kind of financial, economic and also energy policies need to be put in place," he said.

- 'We should not be under illusion'

Also speaking at the Committee, Kadri Simson, EU commissioner for energy, said that Europe is now in good position and started the next refilling season with confidence.

"But we should be under no illusion that things are getting easy. This year will be challenging and the year after that as well. Many uncertainties remain and we need to keep a healthy and prudent supply-demand balance," she added.

Highlighting that Europe can and should get rid of Russian energy completely as soon as possible, she also called on member states and companies to stop buying Russian LNG and not to sign any new gas contracts with Russia once the existing contracts have expired.

"We need to use all of the potential in particular on bio methane and heat pumps ... We will continue and extend our efforts at diversification around the world and to ensure reliable supplies to Europe," she said.