Page 16 - GLNG Week 48 2022

GLNG EUROPE GLNG

TTF remain in lull as EU stalls

on gas price cap plan

PRICES THE front-month price at the Dutch TTF (Title per MWh should be introduced for front-month
Transfer Facility} hub has stayed level in recent TTF derivatives. But the mechanism will only
days at just under €135 per MWh ($1,490 per come into force when the proposed threshold
1,000 cubic metres), following a more-or-less is breached for two weeks, and if the TTF price
steady decline after spiking at close to €347 per exceeds the LNG reference price for 10 consecu-
MWh in late August. tive trading days within two weeks.
Despite the Nord Stream 1 pipeline being There is still no consensus between EU mem-
rendered inoperable in late September by major ber states over the gas price cap, despite months
leaks caused by suspected sabotage, prices have of talks, and the commission’s proposal has done
been falling as a result of lower-than-expected little to bridge differences, with some coun-
temperatures, demand destruction in Europe tries describing the suggested cap as pointless,
and ample global LNG supply. although Brussels could well lower the cap once
“European temperatures have dived in the the necessary legislation is in place.
last two weeks of November, kick-starting the Poland, Greece, Italy and Belgium have been
gas storage withdrawal season and boosting vocal supporters of the cap, with Germany reluc-
pricing momentum in Europe’s gas market,” Rys- tant to apply it due to concerns that a ceiling
tad Energy analyst Zongqiang Luo commented. price on gas could reduce supplier incentives to
“Russia’s short-lived threat to halt gas transits to provide enough gas onwards into Europe, espe-
Europe via Ukraine’s Sudzha entry point on 28 cially when Nord Stream 1’s supply seems highly
November and ongoing discussions in the EU unlikely to resume in the near term,” Rystad
over a proposed cap on gas prices add to the noted. “There are also wider concerns about the
debate.” ability of some EU member countries to provide
Rystad notes that the pressure that Russia has financial aid to help utilities buy more gas or to
placed on Europe’s gas market by cutting sup- compensate citizens facing high household bills.”
plies since its invasion of Ukraine began in late “Not every country has the flexibility to con-
February may have backfired in the long run, tinuously offer financial support over the long
as Germany, once Gazprom’s biggest market in term,” Rystad continued. “According to the latest
Europe, has signed two agreements to secure government debt statistics for 2Q22 released by
LNG supply from Qatar’s North Field from 2026. Eurostat in late October, the government debt-
“Europe’s gas market continues to adapt to to-GDP ratio in the euro area is over 94%, with
the possibility of a winter of ever lower Russian seven countries exceeding 94%.”
gas volumes, despite Gazprom withdrawing “In this case, the region would be looking at
its threat to cut gas flows via Ukraine’s Sudzha structural and compulsory demand cuts unless
entry point,” Rystad said. “Regardless, the impact the European Commission steps in and provides
of the short-lived threat on supplies transiting subsidies as it has in Iberia where €8.4bn in sub-
Ukraine was relatively minor with the market sidies was provided to enable the region to cap
already pricing in the risk of the further decline gas prices at €40 per MWh for gas fired in the
in volume from Russian supplies or even a drop power sector .”
to zero as mentioned in our last outlook.” In a bright spot for European supply, Equinor
The dip in gas prices comes as the European has filed a plan to develop the Irpa gas discovery
Commission faces criticism from EU member in the north of the Norwegian Sea, which will
states for proposing an under-ambitious cap provide an additional 20 bcm of gas production
on gas prices. The commission suggested on from the fourth quarter of 2026.™
November 22 that a “safety price ceiling” of €275

P16 www. NEWSBASE .com Week 48 01•December•2022