Shell chief executive Ben van Beurden has warned that Europe may need to ration access to energy for several years as the crisis confronting the region is likely to last more than one winter.
The forecast from the head of Europe’s largest oil and gas company came after further cuts to Russian supplies sent European wholesale gas prices to a record high last week, threatening to plunge the continent’s economy into a deep recession.
The crisis would test “solidarity” between EU member states as governments were forced to decide how to keep key industries going, Mr van Beurden said on Monday, as the region prepares for a future without access to Russian gas.
Pressures on energy supplies were unlikely to be limited to “to just one winter”, he added.
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“It may well be that we have a number of winters where we have to somehow find solutions through efficiency savings, through rationing and a very, very quick buildout of alternatives,” he said. “That this is going to be somehow easy, or over, I think is a fantasy that we should put aside.”
Governments across Europe face an energy crisis driven by Russia’s invasion of Ukraine and its subsequent cuts to gas supplies, which European politicians have attacked as the “weaponisation of gas”.
Europe’s benchmark gas price soared by almost a third last week to more than €343 per megawatt hour on Friday, as traders and utilities rushed to secure supplies ahead of the winter. That is more than 30 times higher than prices two years ago, and more than 10 times their current level in the US.
In the latest sign of the mounting strains on industry, Finnish utility Fortum on Monday said it had asked the Finnish government, its majority shareholder, for more support after the collateral it needed to hedge surging power prices jumped by €1 billion in a week to €5 billion.
Fortum urged Nordic regulators to help stabilise the power market by adjusting the collateral requirements, warning that a default of a smaller player would cause “severe disturbances to the Nordic power system”.
Mr Van Beurden was speaking in Norway at a ceremony to mark the launch of a new carbon capture and storage deal between the energy majors Shell, TotalEnergies and Equinor and the Norwegian fertiliser group Yara.
His warning over the longevity of the crisis was echoed by Total chief executive Patrick Pouyanné. “My advice to the European governments and policymakers is you have to think without [Russian gas], and if you think without it we will manage,” he said. “There is enough energy in this planet to do without it.”
Under the Yara deal the three oil companies have agreed to capture emissions from Yara’s fertiliser facility in the Netherlands and store it under the seabed off the coast of Norway in the first ever commercial agreement on the cross-border transport and storage of carbon-dioxide. – Copyright The Financial Times Limited 2022
