In 2021, natural gas prices in Europe rose on average by 385% year on year (based on prices recorded at TTF, THE/GPL, NBP and POLPX), from EUR 9.5/MWh in 2020 to EUR 46.12/MWh. The highest price hikes were seen in the Netherlands (TTF), averaging 393%, while the lowest were recorded in Poland (about 327%).
In the first quarter and at the beginning of the second quarter of 2021, temperatures fell and remained below the seasonal average in NWE, which drove up gas demand for heating purposes and, consequently, extended the period in which gas was withdrawn from storage facilities, heavily depleted after winter. The period also saw high demand for LNG from Asian markets, which offered higher prices, making the Pacific region more attractive to LNG suppliers than Europe and prompting partial diversion of supplies. In 2021, LNG imports to Europe fell again year on year, by 7.5 bcm (6.4%), while supplies to Asia rose by nearly 30 bcm year on year.
In the second half of 2021, gas stocks in European storage facilities continued at an all-time low, further aggravated by a very narrow winter–summer price spread and lack of Gazprom’s gas injections into storage. Price growth was also supported by declining volumes of gas produced in Europe due to production constraints in Groningen, Europe’s largest field, and primarily due to dwindling supply of Russian gas via pipelines other than Nord Stream. The total volume of gas piped from east of Poland fell 8% year on year. In addition, production constraints in the UK and more numerous than usual overhauls and failures of production assets in Norway increased gas shortage in Europe during summer.
As from the beginning of the winter season, the prices soared again, setting new records to reach an average of EUR 113/MWh in December. During that period, the average price of natural gas at the Dutch TTF hub was six times higher than in the same period of 2020. The price rises were additionally supported by higher electricity generation from gas-fired sources as the weather was not conducive to generating high electricity volumes from renewables.
An unprecedented increase in its prices on the European market toward the year’s end and a decline in demand from Asia led to more LNG shipments entering Europe, as a result of which the supply of regasified LNG began to recover. However, this was accompanied by a shut-off of Russian gas supplies to Germany via the Yamal pipeline, as well as limited gas flows via Ukraine. In the last months of 2021, gas was supplied to Hungary from the Balkans via the South Stream pipeline, rather than via Ukraine as before. As a consequence, a drop in the volume of Russian gas supplies to North-Western Europe (to liquid European hubs) was much higher than a drop in total supplies to Europe.