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Race for LNG in 2023 to cause new gas price spikes – expert

01 Dec 2022 13:36

Photo: Ole Gunnar Rasmussen

Photo: Ole Gunnar Rasmussen

01 Dec 2022 13:36

(Montel) European gas prices in 2023 could surpass this year’s record highs as countries compete for the same LNG amid dwindling Russian pipeline supply, said an LNG expert on Thursday.

Although the EU’s LNG regasification capacity would be boosted by new capacity in the Netherlands and Germany next year, companies would only have access to the same limited supply, said Ton Floors, an independent consultant and former commercial director of LNG at terminal operator Vopak.

Prices could surpass the record highs seen in spring when EU countries “panicked” to fill up storage with little coordination, said Floors, who was involved in negotiations to build LNG terminals in Germany when he worked at Vopak.

“The real issue is next winter. The competition might throw crazy prices,” said Floors on the sidelines of the LNG Summit in Athens, noting that gas storage filling for this winter was cushioned by healthier Russian flows earlier this year. 

Gas inflows piped from Russia are now down to less than 10% of their average before Russia invaded Ukraine in February. No gas has entered Germany via the key Nord Stream 1 pipeline since late August and Russia was expected to export about 38mcm of gas to northwestern Europe via Ukraine today.

Coordination needed
“Can we coordinate better and not compete for the same cargoes? I can’t see it,” he added, adding Germany would drive competition as it raced to replace supplies lost from Russia.

In 2021, Russia accounted for roughly half of Germany’s gas needs, or around 50bcm, but it aimed to slash its dependence to 10% in 2024.

The benchmark front-month TTF gas contract hit a record high of EUR 345/MWh in March and prices remain about treble last winter’s average. January was last seen today up EUR 0.61 at EUR 147/MWh after earlier hitting a seven-week high of EUR 164.97/MWh on the Ice Endex amid colder weather forecasts.

Berlin has chartered LNG floating storage and regasification units that Uniper and RWE will operate in Wilhemshaven and Brunsbuettel, with an initial import capacity of 10-14 bcm/year.

Uncertain supply
Supply remained uncertain, however, said Floors. It was also unclear how political support for LNG would evolve amid decarbonisation commitments, he said, pointing out that Germany had signed few long-term agreements for LNG, including one 15-year deal this week. 

“Germany is just buying time,” Floors said, adding that Berlin had wanted five-year deals but could not get them, and the current political support for LNG could change by the middle of the decade with new elections. 

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