Russia's gas pipeline project "Beixi-2" to Germany has completed the welding of the last section of the pipeline, and will be commissioned later. It is planned to be put into operation before the end of 2021. Analysts pointed out that after the "Beixi-2" is put into operation, it will have limited effect on stabilizing European natural gas prices in the short term, but in the long run, it will provide Europe with more energy security, and it will also meet the needs of European energy structure transformation.

Since 2021, the rebound of the new crown epidemic has led to insufficient global natural gas production, and the economic recovery has further exacerbated the imbalance of natural gas supply and demand. In addition, in the summer of 2021, the high temperature in many places in Europe broke the record, the demand for electricity has surged, and the supply of natural gas has become tighter. These factors have exerted upward pressure on natural gas prices. Data show that European natural gas prices have risen more than 10 times in less than a year and a half. The Dutch natural gas futures price, which is regarded as the weather vane of natural gas prices in Western Europe, climbed above US$15 per million British thermal units in mid-August 2021.

Analysts said that although the "Beixi-2" project is completed, the supply of natural gas is expected to be limited in the short term after it is put into operation. This will undoubtedly intensify inflationary pressures in European countries, bring higher production and living costs to enterprises and consumers, and affect the process of economic recovery.

Meeting European natural gas needs

The latest data from Eurostat shows that the inflation rate in the euro zone in August 2021, calculated at an annual rate, hit a 10-year high. Among them, energy prices rose 15.4% year-on-year, which was the main reason for the increase in inflation that month. British Gas executive Qassim Mangla said that Europe is facing a gas shortage and has never seen such a price situation before. In the winter of 2021, Britons will face higher electricity bills, and some companies may be forced to restrict activities.

From a long-term perspective, the "Beixi-2" project diversifies European natural gas supply channels, helps meet the long-term demand for imported natural gas in the European energy market, and also meets the needs of the European energy structure transformation in recent years. The "Beixi-2" project has a designed annual gas transmission capacity of approximately 55 billion cubic meters, which can double the amount of natural gas exported from Russia to Germany and export Russian natural gas to other European countries. Natural gas is a relatively clean fossil fuel with far lower carbon emissions than coal. It is more mature than traditional energy alternatives such as solar energy, wind energy, and nuclear energy.

In recent years, tackling climate change has become one of the EU's most important political issues. In July 2021, the European Commission proposed a package plan proposal for addressing climate change, covering multiple fields such as transportation, energy, construction, agriculture and taxation policies, aiming to achieve the EU's net greenhouse gas emissions by 2030 to be the same as 1990 levels. Reduce the ratio by at least 55%, and achieve carbon neutrality by 2050. The EU member states have also introduced their own emission reduction policies. Germany, the EU's largest economy, is one of the world's largest natural gas importers. Over 90% of China's natural gas consumption needs to be imported. At present, natural gas only accounts for about 25% of Germany's energy consumption. As Germany phased out nuclear power and coal power, it needs to substantially increase natural gas imports to buy time for the transition to renewable energy.

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Chris Weaver, CEO of Macro Consulting, said that natural gas will become a transition fuel in the coming decades as major economies commit to achieving carbon emissions targets. James Tafern, an analyst at Esson Huamai, also said that in the case of limited funds, the government can choose to switch to natural gas to reduce emissions. However, some observers worry that "Beixi-2" may face geopolitical risks in the future, and there are still uncertainties in operation.Editor/XuNing