pipeline gas

European fears of further energy-crisis woes not yet over

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European Commission officials fear the continent has yet to fully break away from further energy-crisis dangers, despite capacity-filled gas storage facilities and a mild winter, as a five-year bilateral pipeline gas transit agreement signed by Kyiv and Moscow in 2019, three years before Russia’s invasion of Ukraine, is set to expire at the end of this year and could lead to higher energy prices.

The agreement’s end would reduce the EU’s total gas imports by 5 percent, the European Commission has briefed Brussels officials in a memo, Politico has revealed. Countries in central and southeast Europe would be particularly affected, the memo notes.

Natural gas supply to EU member states has continued through this Ukrainian-Russian transit agreement, despite the ongoing war.

However, Ukraine has declared it does not intend to renew this agreement, which  facilitates Russian gas supply to Europe, while European Commissioner for Energy Kadri Simson has noted it is not in the EU’s interests to push for an extension.

 

 

Gas prices will not fall as market still tight, experts note

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LNG prices will not decline, market experts have forecast, noting the global market remains tight, new production-related investments will not be completed before 2025, while a cold winter could quickly deplete European gas reserves.

This projection was highlighted by executives representing some of the world’s biggest LNG companies at the 23rd World LNG Summit & Awards, hosted in Athens. Participating officials generally agreed that gas prices will remain relatively high this year due to a number of factors, including geopolitical instability, inflationary pressure and, most importantly, the absence of additional international production capacity.

“Natural gas reserves in Europe are high, accounting for 30 percent of demand in winter. However, if this winter season is cold, these reserves will diminish quite fast,” Anatol Feygin, executive vice president and chief commercial officer of Cheniere Energy, told the event, adding that no significant number of new LNG plants will come on stream in 2024.

Europe is not expected to encounter supply issues this winter as European countries can afford high prices and, as a result, will be able to attract significant volumes for yet another winter, unlike less affluent countries in other parts of the world.

Feygin, along with other LNG industry officials, agreed that LNG prices cannot de-escalate to pre-energy crisis levels if Russian pipeline gas remains sidelined from many markets.

 

Collective gas orders increase in second purchasing round

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A second round of collective European gas purchases, through a platform similar to one established for vaccine orders during the pandemic, has resulted in natural gas orders totaling nearly 12 bcm, well over a quantity ordered during the procedure’s first round in May.

However, the EU initiative fell short of attracting full participation. Second-round orders were delivered to twenty European grid entry points, the majority of quantities at entry points in the Netherlands, France, Italy, Bulgaria and Germany, as well as Ukrainian storage facilities, Sefcovic noted.

“The positive results of this second round illustrate that there is a need and clear added value to join forces, pool our demand and work together to guarantee stable and affordable gas supply to the EU market,” noted the European Commission’s Vice President Maros Sefcovic, who oversees the platform, named AggregateEU.

It was established by the EU following Russia’s invasion of Ukraine to prevent bidding wars between fellow member states and utilize their collective bargaining power potential for competitively priced energy supply as an alternative to Russian natural gas.

Approximately 5.5 bcm, or 45 percent, of the second round’s orders, totaling 11.98 bcm, were made for LNG, well over this energy source’s share of orders in the first round, below 20 percent of the total. Pipeline gas represented all other collective orders made through the platform in the second round.

A third round is expected to be staged in September and is planned to be followed by two further rounds before the end of the year.

Solid trader interest for LNG terminal slots despite crisis-related concerns

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Demand is high for LNG slots at the Revythoussa terminal in 2022, made available through ongoing gas grid operator DESFA auctions, attracting strong interest from importers, despite concerns that the current energy crisis and difficulty to make price projections could dampen interest at these sessions, ending November 2 with a third and final auction.

The level of interest for LNG slots at DESFA’s Revythoussa terminal, on the islet just off Athens, is significant for the gas grid operator as well as power grid operator IPTO, as it helps shape the country’s energy security picture, especially for the challenging colder months, right up until the end of April in 2022.

A total of 2.5 billion cubic meters of LNG is expected to be needed in 2022 to satisfy the Greek market’s needs, according to sources.

Besides LNG, overall natural gas consumption in the Greek market next year is expected to reach 7.5 billion cubic meters.

Of this total, 5 billion cubic meters is expected to be supplied through pipeline gas imports, 3.5 million cubic meters coming from Russia, one billion cubic meters from Azerbaijan, through the TAP route, and 0.5 billion cubic meters from Turkey’s Botas.

 

 

 

Revythoussa terminal LNG slot auctions for ’22 starting today

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Gas grid operator DESFA will today stage the first of three auctions planned until November 2 for LNG slots at its Revythoussa terminal in 2022, following a slight delay in the hope of a gas price de-escalation, to no avail.

These sessions are planned to be immediately followed by auctions – to be staged until the end of the year – for reservations of LNG slots at Revythoussa between 2023 and 2026.

DESFA, along with power grid operator IPTO, have their eyes set on the first auction series for LNG slot reservations at Revythoussa in 2022, given the extraordinary market conditions prompted by the sharp rise in natural gas prices over recent months.

According to market experts, making forecasts about the auctions concerning 2022 is next to impossible as it remains unclear if importers, especially electricity producers, managing their own gas supplies, will seek LNG slots at Revythoussa or hold back and instead opt to punt on pipeline gas.

Whatever the outcome, energy sufficiency will not be an issue as the Revythoussa terminal nowadays represents only 30 percent of total gas imports into Greece, the northern grid interconnection and TAP playing dominant roles, DESFA officials noted.

 

 

Incoming LNG shipments down sharply, prices rise globally

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LNG shipments into Greece are headed for a quieter period following heightened recent trading activity that put this energy source at the domestic sector’s forefront in the first half of 2020, overshadowing pipeline gas supply.

Latest activity indicates a swing in favor of pipeline gas, now favorably priced.

Last November, 18 tankers docked at gas grid operator DESFA’s Revythoussa LNG terminal just off Athens, bringing in a total amount of 1.5 million cubic meters of LNG, well over the schedule for this coming November, limited to three tankers booked for a total of 355,000 cubic meters.

Activity at the Revythoussa terminal was also subdued last month. Four LNG tankers brought in a total quantity of nearly 300,000 cubic meters.

LNG prices at the Dutch gas trading platform TTF, one of Europe’s biggest hubs, have risen constantly, as is the case internationally, following a dip in July.

Analysts believe rising demand in Asia, especially China, will make up for anemic demand in Europe and push LNG prices even higher as winter approaches.

Pipeline gas supply is expected to reassert its position in Greece.

Higher LNG prices prompting pipeline gas resurgence

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Increased LNG prices, well above levels registered in 2019 and the first half of 2020, promise to bring about market changes, including a decrease in the high level of imports witnessed over the past few months.

LNG prices are currently double those registered at the beginning of this year, reaching 4 dollars per 1000btu from 2 dollars per btu.

The period of lower LNG prices in the market appears to have ended, officials have noted.

This development promises to bring about a pipeline gas resurgence following LNG’s dominance in the Greek market over the past year and a half, driven by record-low price levels.

LNG prices fell to extremely low levels as a result of the market availability of significant shale gas amounts from the US as well as new sources, primarily Australian.

LNG prices now appear to be steadying at higher levels.

The prospect of a pipeline gas rebound is also being helped by a stabilization of oil prices at low levels, containing oil-indexed pipeline gas prices and reinstating the competitiveness of pipeline gas.

The market fluidity caused by the pipeline gas and LNG price shifts has increased the work challenge for gas traders, affecting their ability to make forecasts.