US and Russia Prepare to Shut Gas Pipelines... Concerns Over Heating Crisis This Winter (Comprehensive)

US Natural Gas Prices Surge 61%
Shale Gas Production Expansion Blocked and 20% Export Increase... Reserves Decrease
Heating Costs Expected to Rise 30%
Europe Natural Gas Prices Triple
Russia Promised Supply Increase but Deliberately Reduced Gas Supply
Pressure to Approve Russia-Germany Direct Gas Pipeline Intended

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min, Reporter Kim Su-hwan] As natural gas prices soar ahead of the winter heating season, energy-exporting countries such as the United States and Russia are preparing to shut off gas pipelines amid concerns over a heating crisis. If severe cold hits this winter and resource-exporting countries impose export restrictions, not only South Korea but also a global energy shock is feared.

US Blames "Exports" as Gas Prices Surge

The Wall Street Journal (WSJ) reported on the 7th (local time) that the export of natural gas from the United States is causing a rise in domestic natural gas prices.

According to WSJ, although US natural gas production is about 4% below the peak level in 2019, approximately 19-21% of production is being exported. WSJ's report argues that a significant portion of production being exported overseas leads to a shortage of natural gas supply domestically and thus price increases.

The US Energy Information Administration (EIA) also found that US natural gas reserves decreased by 8% compared to the previous year as of October 29.

The Henry Hub Price, a representative natural gas price indicator in North America, recently surged to $5.516 per million BTU. Considering that the price was $3 per million BTU around the same time last year, this represents a 61% increase. EIA estimates that heating costs for households using natural gas heating this year will increase by 30% compared to last year.

The US, which previously banned energy exports, became an energy-exporting country starting in 2016 by allowing petroleum exports, thanks to the shale energy revolution. The US is the world's third-largest natural gas exporter. Last year, South Korea was the largest importer of US natural gas.

Despite rising oil prices, natural gas production has not increased due to specific reasons. The Biden administration has restricted new shale drilling on federally owned lands to address climate change, and shale industry investors are focusing on increasing dividends, making production expansion difficult.

As energy shortages have worsened recently, China and Japan have been pursuing imports of inexpensive US natural gas. WSJ's report is interpreted as reflecting negative public opinion about domestic energy exports.

WSJ claimed that the US is facing supply pressure as it supplies large amounts of natural gas overseas, while Americans are confronted with huge heating bills.

Russia Fails to Keep Promise to Expand Supply

In Europe, concerns over soaring gas prices persist as Russian President Vladimir Putin's promised increase in Russian natural gas supply has yet to materialize.

According to Bloomberg News, Russia's state-owned energy company Gazprom did not participate in an auction to secure additional capacity for the major European gas pipeline passing through Ukraine and Poland.

Currently, in the European market, natural gas prices have surged more than threefold compared to earlier this year due to increased gas demand, reduced gas reserves in Europe, and decreased wind power generation, triggering an energy crisis. European authorities have pointed to deliberate supply control by the Russian government as the cause of the gas supply shortage.

Earlier, Europe raised suspicions that Russia is intentionally reducing gas supply to pressure European authorities for the swift approval of the recently completed Russia-Germany direct gas pipeline, Nord Stream 2.

In response, President Putin announced that natural gas would be supplied to the European region until the 8th of this month. However, as of one day before the promised date, the commitment has not been fulfilled. Frank van Doorn, head of trading at Swedish power company Vattenfall, warned last week, "If additional gas supply is not provided from the 8th, prices will surge."

Bloomberg News pointed out, "Especially with demand expected to increase ahead of winter, current gas reserves in Europe are significantly lower than usual."