By Nomenzi Dlamini
With the Russia-Ukraine conflict raging on, the global gas market has been sent into a tailspin with prices surging high. But Mozambique has not been able to capitalise on this as the conflict in the country has negatively hampered its potential. Mozambique has missed out on the mega surge which has seen prices rising to more than €300/MWh in Europe.
The New York Times reported that the price of gas was already rising before Russia invaded Ukraine and it has remained on the same path. Gas prices based on the cost of crude oil jumped in response to the invasion and Western Sanctions that were imposed on Russia. The United States and Britain led calls for bans on Russian energy, creating a demand that could not be covered by other gas producers.
Quarterly reports of the European gas markets indicate that at the beginning of the second quarter of 2022, after reaching historic peaks in March, daily spot gas prices fell back and remained relatively stable in April and May. In June, however, Russia’s Gazprom announced the termination of gas supply to several European customers and started to curb flows on Nord Stream 1, wholesale gas started to rise again.
By the end of summer, gas prices rose to historic highs (316 €/MWh on 26 August). Russian gas imports reportedly fell measurably through all transit routes; flows through the Belarus transit route dropped by 90 percent year-on-year. As of May, flows fell practically to zero. Flows through Nord Stream were down by 12 percent, falling to zero by the end of summer.
Between January and August 2022, Russian pipeline gas imports in the EU fell by 43 billion cubic metres (bcm), and total gas imports from Russia, including liquefied natural gas (LNG), were down by 39 bcm. At the same time, non-Russian LNG imports were up by 28 bcm and pipeline imports other than from Russia rose by 17 bcm.
EEU gas consumption fell steeply by 16 percent (-13.9 bcm) year-on-year, amounting to 71 bcm. Gas demand in electricity generation also fell, by 7 percent (-8.1 TWh). EU LNG imports were up by 49 percent year-on-year, amounting to 36 bcm, while overall EU gas imports were down by 3 percent. The EU spent an estimated €75 billion on gas imports in Q2 2022, a share the country of Mozambique could have enjoyed a huge chunk off.
Mozambique has the third largest reserves of liquefied natural gas (LNG) on the African continent. Substantial invest¬ments were made in the country to tap into those reserves, with TotalEnergies leading multibillion-dollar projects in the province of Cabo Delgado, in the country’s north-eastern province.
However, the ongoing militia attacks of ISIS have put a stop to the projects. TotalEnergies has even been forced to declare a Force Majeure. Now there is uncertainty over the project that had the backing of US and South African financial institutions.
The European Commission is however trying to circumvent the current situation and find ways to reduce the ever-rising gas prices. The EU has proposed a new emergency regulation to address high gas prices and to ensure secure supply in the season. It will be done through joint gas purchasing, price limiting mechanisms on the TTF gas exchange, new measures on transparent infrastructure use and solidarity between the Member States, and continuous efforts to reduce gas demand.
European Union president Ursula von der Leyen said the Russia/Ukraine war had severe consequences on global and European energy markets. “We act in unity and have prepared well for the winter ahead, filling our gas storages, saving energy, and finding new suppliers. Now we can tackle excessive and volatile prices with more security. We will introduce a temporary mechanism to limit excessive prices this winter, while we develop a new benchmark so that LNG will be traded at a fairer price,” she said.
Leyen further stated that they would provide legal tools for joint EU purchasing of gas, ensure solidarity in the security of supply for all Member States and negotiate with reliable gas suppliers to secure gas at affordable prices.
“But we must also accelerate investment in renewables and infrastructure. Investing more and faster in the clean energy transition is our structural response to this energy crisis.”
The concentration of pirate attacks in the Gulf of Guinea (GoG) has attracted global attention. This maritime region has taken over from the east coast of Africa as the hotbed of maritime piracy. About 40% of the recorded ship attacks in 2020 took place in this Gulf.