Page 9 - EurOil Week 34 2022

EurOil PERFORMANCE EurOil

Europe pays spiralling LNG

prices to fill storages

EUROPE EUROPE’S efforts to fill its gas reserves ahead demand in the coming months.
of the coming winter could come with a hefty The is all bad news for the EU’s Green Deal,
Europe is just 5% short price tag, as global LNG price have reached up and more gas consumption in the power gen-
of reaching its 80% to 10 times their normal levels as the continent eration, especially with some coal now being
goal for gas storage scrambles for available cargoes. burned in Germany, means that the continent’s
utilisation, but adding The UK, which has little gas storage capacity, emissions could rise.
extra gas will come at a has bought its first cargo from Australia for the This spells danger for Brussels’ efforts to cut
signiifcant expense. first time in six years as Europe’s importers scour emissions by 55% by 2030, and could make
the globe for available volumes and are willing to meeting 2050 net-zero targets more difficult if
pay record-high prices. and when the current gas crisis passes.
Meanwhile, EU member states have filled Germany is also considering postponing the
their gas storage facilities to close to 75% capac- closure of its remaining three nuclear reactors as
ity, equivalent to 75bn cubic metres. This is just the energy crisis digs in.
5% short of the EU’s policy of having its storage
sites 80% full by November 1 as part of Brussels’ Scrambling for supply
led efforts to create a united front to combat cuts Among the options available for sourcing LNG
in Russian gas imports. are Asia and Qatar, but both come at a cost and
European gas buyers have now almost filled high risk.
the storage facilities well ahead of Brussels’ European countries are now scrambling
November 1 deadline, but at considerably high for new supply. Germany has signed a mem-
prices. orandum of understanding (MoU) with
On August 18, futures at the Dutch TTF gas importers Uniper, RWE, EnBW and VNG to
hub reached €230.05 per MWh ($2,844 per 1,000 ensure that the country’s two new FSRUs at
cubic metres), up from €220 per MWh ($2,720 Brunsbuettel and Wilhelmshaven are fully
per 1,000 cubic metres) on August 16. This was supplied from their expected operational
up from €202 per MWh ($2,200 per 1,000 cubic start this winter until March 2024, Reuters
metres) on July 26. reported.
All this means prices have doubled even from The two FSRUs will allow Germany to receive
June’s highs and are over 10 times normal levels. 12.5 bcm of LNG per year, equivalent to about
Gazprom meanwhile said that prices could 13% of the country’s gas consumption in 2021,
spike a further 60% from current levels in the according to Enerdata.
coming winter, imposing more pain on Euro- Part of an LNG cargo from Australia’s North
pean consumers. It said they could exceed West Shelf project was transhipped in Malaysia
$4,000 per 1,000 cubic metres this winter. This before travelling to the UK, Bloomberg reported.
means that any gas that does come from Russia Mathew Ang, an analyst at Kpler, told
to Europe could be even more expensive than Bloomberg that the Attalos LNG tanker received
LNG. the partial LNG cargo from the Patris tanker
Russian gas supply remains significantly con- in Malaysia in July. Before that, the Patris had
strained, having slumped to an all-time monthly loaded at Australia’s North West Shelf, where
low of 3.6 bcm in July, down 23% from the previ- BP has capacity. The rest of the cargo went on to
ous low registered in June. South Korea.
The result is that European buyers are pay- The vessel will arrive at the Isle of Grain ter-
ing through the nose for LNG on global spot minal in the UK on August 22, according to
markets and must compete with Asian buyers. ship-tracking data.
Closer LNG exporters in the US and Africa are Alongside Australia, Qatar is another major
already operating at full capacity, making global source of LNG that Europe could turn to in its
targets tight and driving up prices for spot LNG effort to replace Russian gas.
cargoes to crazy prices. Russia sold 150 bcm to the EU in the form of
Prices are no longer “normal,” and European pipeline gas and LNG in 2021, current projec-
buyers must still compete with Asia to secure tions see this figure falling to around 80 bcm in
cargoes. 2022, with the 35 bcm sold to other European
Asian spot LNG prices reached just below $60 countries also likely to decline sharply, said
per million Btu on August 17 Wednesday, their James Henderson of the Oxford Institute for
highest level since early March. Energy Studies (OIES).
All this means that pursuing a green transi- However, Qatar’s gas sector is already oper-
tion or a green post-COVID economic recov- ating close to capacity, Capital Economics said
ery is now falling down the energy agenda, as in a note.
governments buy gas at whatever price to meet While the North Field expansion that comes

Week 34 26•August•2022 www. NEWSBASE .com P9