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LNG reliance exposes EU gas to new volatilities – CEOs


27 Sept 2023 10:24

27 Sept 2023 10:24

(Montel) Europe’s increased reliance on LNG means the gas market has become more exposed to global supply-demand trends, which could still trigger some heightened volatility despite already high stock levels, the CEOs of Eni and Snam said on Wednesday.

Eni CEO Claudio Descalzi said gas prices were “susceptible to increasing volatility” as supply chains were more fragmented now than before Russia invaded Ukraine last year. Prior to the war Russia had supplied Europe with around 40% of its gas needs – now it’s less than 10%. 

“It’s a much more volatile system, much more fragmented, and therefore much more subject to increases and decreases,” Descalzi said on the sidelines of an energy conference in Milan. 

He pointed, for example, to recent strike action at two key Australian LNG plants, which spooked traders and led to price increases in Europe, as well as other supply disruptions linked to unexpected – or prolonged – maintenance outages.

“The energy situation with Russia, which has created a 150-160bcm gas hole, is still very volatile and we see it all the time,” he said.

“In addition, [although] Europe has exceeded 95% of its storage capacity, we see prices are still fluctuating,” he added.

The European benchmark TTF front-month gas contract has so far this month fluctuated between lows of EUR 30.50/MWh and highs of EUR 45/MWh, according to Ice Endex data. Last year, prices had spiked to a record above EUR 340/MWh.

European gas storage facilities were seen last at just over 95% of capacity, compared with 88% a year ago, according to Gas Infrastructure Europe data.

“It’s true that supplies are at near-full capacity… but the system is much more sensitive as it is based only on LNG,” the CEO said.

In addition, meteorological events were increasingly affecting gas prices, the CEO said.

Global market

“The more we diversify on the LNG market, the more we fit into a global market where there are important players who move significant volumes,” said Snam CEO Stefano Venier, at the same event.

The global gas market was still “very fragile”, with recent events – such as the strike in Australia and the maintenance in Norway, now Europe’s biggest gas supplier – immediately leading to price spikes and raising fears of gas availability, he added.

Regarding Italy specifically, the country’s LNG imports by the end of August had reached 11bcm, which was up by 25% on the year and accounted for more than a quarter of its total 42bcm gas imports, he said.

He noted also that within the coming three months, more than 1bcm of capacity would be added via the floating storage regasification unit at Piombino, which became operational in July.

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