Page 6 - GLNG Week 36 2022
P. 6
GLNG COMMENTARY GLNG
Other options include breaking the link
between gas and power prices, which would question. Germany has proposed taxes on fossil
hopefully see a fall in electricity costs. fuel production and gas imports, while the UK is
However, speed is of the essence, and cobbling refusing to introduce any new taxes, suggesting
together a package of reforms will take week. The that the support will be funded by borrowing.
formal Energy Council meeting is due in Octo- Ultimately, the economic impact of high LNG
ber, while von der Leyen will make a State of the prices and the cost of intervention measures
European Union speech later in September. means that the economic impact will be enor-
Nevertheless, she firmly placed the blame for mous, with gas-intensive industries cutting
the current energy crisis on the Russian govern- back activity and energy skyrocketing for both
ment, accusing it of weaponizing energy as part domestic and industrial users. Steel, fertiliser
of its invasion of Ukraine. and other energy-intensive industries are set for
Such a view is shared by Sergiy Makogon, a wave of closures and reduced output.
CEO of Gas Transmission System Operator of Coal is also making a comeback, with the fuel
Ukraine (GTSOU), who highlighted that Europe accounting for 33% of Germany’s power so far
has enough supply routes to source gas, but that this year, up from 17% in 2021. Gas’ share of the
it is Gazprom that has shut down gas supplies. power mix fell from 18% to 12%, the Financial
Freight rates for LNG tankers are growing, and Times reported.
the tanker market is now sold out for winter as All this comes as Germany will continue
energy majors are refusing to release their vessels to close its last three remaining reactors in
as they typically do at the end of summer. December.
This high-price environment is creating con-
Borrowing siderable financial and economic risk for LNG
Meanwhile, Germany and has put forward a traders, gas producers and government. While
EUR45bn funding package to subsidise the cost gas producers and utility companies are able to
of gas. rake in high profits at the current time, the face
In the UK, which is not vulnerable to any Rus- new taxation and pricing caps from govern-
sian physical supply cut in terms of actual vol- ments eager to rein in what seems to be runaway
umes, but is highly exposed to high wholesale prices.
prices, new Prime Minister Liz Truss said that Meanwhile, Russia’s invasion of Ukraine con-
her new government would borrow the cash to tinues, and global gas markets are continuing
support energy bills, with the amount of being the painful process of forging new trading pat-
suggested at up to £130bn. terns and managing ballooning prices while also
Where this money comes from is a major meeting demand.
P6 www. NEWSBASE .com Week 36 09•September•2022
