Page 12 - GLNG Week 26 2022

GLNG EUROPE GLNG

Europe must make every

molecule count, US gas prices

slip on decreased demand

COMMMENTARY EUROPEAN countries need to make every continue to hold steady at 300 mcm per day.
molecule of gas count in the coming weeks as This may still not be sufficient, however, as
potential decreases in flows and maintenance storage inventory levels rose by only 8.2 TWh
of critical infrastructure will only heighten the in the previous week, bringing the European gas
supply shortage. storage level up to about 51.2%.
Countries are exploring creative ways to This is a far cry from the average of about 43
counter this, including incentivising consumers TWh of weekly storage injections for the past
to use less gas in a bid to increase storage levels two months.
before the gas-hungry winter season. An 80% storage level target by Novem-
Russian gas flows remain flat this week, as ber would be out of sight if this injection rate
storage injections follow suit, helping to steady continues.
European prices. Germany has, as a consequence, declared an
Dutch TTF prices remained steady at about “alarm phase” second stage of its emergency gas
$39.98 per mmBtu on June 27 as gas supplies to plan, aimed at managing supplies and support-
Europe held firm, although remaining under ing its storage requirement of 90% by December.
heavy scrutiny since recent disruptions. Phase 2 involves Germany restarting old
Disruption over the past couple of weeks for coal-fired plants, as well as introducing incen-
the European gas market has dragged on, with tives – such as a credit line of €15bn ($15.86bn)
the Nord Stream 1 facility continuing to export – that rely on market fundamentals to cushion
about 60mn cubic metres per day of gas over the the loss in gas supply.
weekend of July 25 and 26, with flows across the The alarm phase announcement stops short,
Ukraine Transit also holding steady at around 34 however, of allowing utilities to pass on the
mcm per day prices in full to end consumers.
Despite Russian flows, this has been a marked Germany has also announced an emer-
reduction from the levels of 150 mcm per day gency gas auction plan that allows consumers
before the Nord Stream 1 pipeline reportedly with a gas surplus to sell that gas at auction to
experienced compressor issues, forcing Rus- be returned into storage, thereby incentivising
sian state-controlled operator Gazprom to stop consumers to save gas.
operations at one of the three compressor units, Austria and the Netherlands are setting out
bringing down the effective pipeline capacity. plans to rely more on coal-powered plants, while
The recent loss of both Nord Stream 1 flows France and Italy are likely to follow suit in the
and the Freeport LNG cargoes exiting the US has coming days, aided by a slew of measures to
sent major shockwaves across power markets. manage gas consumption and storage.
Impending annual maintenance for Nord France is set to incentivise gas storage by pro-
Stream 1 from July 11 to 21 remains on the viding a gas price guarantee for withdrawals.
cards, which would reduce Russian gas supply – This would allow companies to withdraw
already down 40% – to zero for some time, with gas at the same price at which it is stored today,
no guarantee of a start-up date. regardless of the future price.
Such a move would have significant impli- This would reduce the risks borne by gas
cations for the European and global market and holders if the future gas price were to fall much
push prices even higher. further from today’s purchase price.
Europe must make every molecule count but
can remain upbeat that Norwegian gas supplies

P12 www. NEWSBASE .com Week 26 01•July•2022