Page 17 - GLNG Week 09 2023

GLNG EUROPE GLNG

BCS forecasts a gas price of $445/kcm

for 2023 as demand drops and supplies

increase

EU EUROPEAN gas demand is likely to decrease of the large Freeport LNG LNG plant (design
by 10 bcm in January and February, owing to capacity is 15mn tonnes per year (tpy), or about
European gas demand warmer weather than usual and conservation 20.7 bcm).
is set to increase by 10 measures, BCS said in a note on March 2. Russia deliveries to non-CIS countries,
bcm in January and Gas price have tumbled three-fold in the last including EU countries, in 2022 amounted
February as a result of few months to $515/1,000 cubic metres and are to 100 bcm, according the chairman of the
warmer weather and now below August 2021 levels. The average gas board of Gazprom, Alexey Miller, speaking at
conservation measures. price in Europe in December amounted to about the beginning of January, 45% less than a year
$1,272 per 1,000 cubic metres, in January $712, earlier.
and in February around $583. The EU’s storage In the long term, the volume outlook for
tanks were also 61% full as of March 2, a record Europe is also downgraded for 2025, said BCS.
high for the time of year. Gazprom’s long-term European gas exports are
However, the outlook for the new heating expected to be dramatically affected by Europe’s
season this autumn remains uncertain. Russia goal of reducing Russian gas imports and the
used to send some 150bn cubic metres of gas to extremely high gas prices since late 2021.
Europe per year, but that fell to 60 bcm in 2022 The anticipated rise in LNG projects that
after the pipelines were shut down and then will reach the market in four to five years could
destroyed in the second half of the year. lead to ruinous competition, which will affect
The International Energy Agency (IEA) the demand not only in Europe but also in
earlier predicted that Europe will face a 40 bcm price-sensitive countries such as India, Pakistan
shortfall of gas and this week said Russia will and Bangladesh. Consequently, the long-term
deliver a total of 25 bcm to Europe this year, European export forecast has been reduced by
mostly via Ukraine and Turkey. 25%, from 100 bcm to 75 bcm, though it still
“European gas demand likely fell 10 bcm in reflects a modest rebound in volumes from
January and February on warmer than typical today’s levels, BCS said.
weather, on top of the c20% apparent fall due to Price adjustments are expected, with a bid
conservation measures. We think LNG imports drop in 2023 but an increase in the long term.
may retreat somewhat as lowered prices help a The estimated 2023 European export price is
rebound in Asian demand, although return of likely to drop by around $510 per 1,000 cubic
the US Freeport LNG plant from a fire-induced, metres or 55% from $955 per 1,000 cubic metres
eight-month shutdown will boost supply. A to $445 per 1,000 cubic metres. However, the
warm start to 2023 means Europe may take even 2024 price is expected to rise by $30 per 1,000
less Russian gas than we had assumed. We lower cubic metres, or 10%, to $340 per 1,000 cubic
our Europe+Turkey export forecast by 5 bcm, metres as the focus shifts to futures markets for
from 65 bcm to 60 bcm,” BCS said in a note. that year.
Last year Europe was able to make up the In the long term, changes in the competitive
missing Russian gas by importing a record 180 landscape for LNG will result in slightly higher
bcm of LNG, up 63% year on year, taking advan- prices in the European market. Consequently,
tage of the reduced demand for LNG due to Chi- the normalised price has been raised by 10% or
na’s economic slowdown after the government around $30 per 1,000 cubic metres, from $310
put the country on a COVID lockdown. The per 1,000 cubic metres to $340 per 1,000 cubic
restrictions have since been lifted and China’s metres.
economy is bouncing back which will increase Due to a reduction BCS forecasts Gazprom’s
its demand for gas. dividend payments to fall by about 60%, from
The volume of the global market for LNG in RUB46/share to RUB18, and the increased esti-
2023 will grow by 4.3% to a level of about 550 mate of arbitration settlements from €10bn to
bcm, according to the latest IEA estimates. Mar- €15bn, BCS said. Historically Gazprom paid
ket growth in 2023, according to IEA forecasts, only RUB6/share before the war.
will be ensured by the continued increase in Furthermore, the reduced long-term Euro-
Europe’s LNG imports, as well as due to a “mod- pean exports from 100 bcm to 75 bcm have also
erate recovery” in demand in Asia. contributed to Gazprom’s decrease in valuation.
Growth rates of LNG imports to Europe in However, the increase in the long-term Euro-
2023 will also be affected by the launch in the pean gas price assumption has offset some of
United States in Q1 2023 of the full capacity this decrease. ™

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