Record gas prices pose risk to European economic recovery — Rosneft CEO

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Igor Sechin noted that limited opportunities for electricity generation with the help of alternative sources have led to record gas prices amid growing demand

VERONA, October 28. /TASS/. Record gas prices in Europe threaten the region's economic recovery, Rosneft CEO Igor Sechin said on Thursday. He was speaking at the session “Structural Changes in the Economy and the Future of Energy” held as part of the 14th Eurasian Economic Forum.

He noted that limited opportunities for electricity generation with the help of alternative sources have led to record gas prices amid growing demand.

“This price level certainly threatens the economic recovery of Europe. Record prices have become an indicator of the shock that Europe has experienced,” Sechin said.

The Rosneft CEO added that while long-term contracts provide for some stability in the gas market, they do not guarantee its full stability, since spot supplies for short-term transactions are developing. “But Europe's hopes for spot supplies of LNG from the US were not fulfilled. Moreover, prices for such supplies were not properly hedged,” he said.

Sechin noted that the gas crisis in Europe was caused by a set of factors, in particular by excessive confidence in wind power generation, which led to low occupancy of underground gas storage facilities in Europe. He recalled that, according to climatologists, the wind strength in September-October 2021 was 15% lower than “historical levels,” which negatively resulted in less power generated from wind.

As a result, it was only at the beginning of winter that EU officials began to understand that, at the current level of technology, renewable generation cannot ensure stable energy supplies, he said.

“All this led to record gas prices, which have soared 5 times since the beginning of this year and are now threatening the long-term economic recovery of Europe,” the head of Rosneft said. For its part, Russia is helping to resolve the crisis as much as possible by ensuring stable gas supplies to Europe and fully fulfilling contractual obligations, he reiterated.

Among other reasons that caused the gas crisis in Europe, Sechin named the reorientation of American liquefied natural gas (LNG) supplies to Asian markets. In seven months of the year, LNG supplies to Europe increased by 47% and LNG supplies to the Asia-Pacific region soared 2.6 times.

“As you can see, the political and economic priorities of the United States differ: promising to significantly increase gas supplies to Europe, in reality, the United States first of all increases them in a completely different direction. As a result, in terms of oil equivalence, the price of gas in Europe reached $200 per barrel, which is more than twice the price of oil, “Sechin stressed.

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