Gastech, the first major in-person industry event since the pandemic started, couldn’t have happened at a better time to show that despite the push toward renewable energy, natural gas will continue to play a key role in keeping consumers warm and industries operating. As energy ministers of major gas-producing nations and top executives of the world’s largest gas companies and commodity traders gathered in Dubai for the start of Gastech this week, natural gas prices in Europe continued to surge amid a very tight market.
Demand is surging ahead of the winter heating season, but gas stocks are at multi-year lows, and supply cannot catch up with demand. Weather in northern Europe in recent weeks has reduced wind power generation, forcing utilities to turn to more gas and even coal - despite the EU’s green ambitions - to keep the lights on and industrial activities running. Consumers are feeling the pinch, and so are industries, some of which are curtailing operations. The gas and power price spikes threaten to knock back the post-COVID recovery in European economies.
Governments are forced to intervene to help lower-income consumers and smaller power providers, and all political leaders are wary of higher energy costs for consumers (voters).
Norway, Europe’s second-largest gas supplier after Russia, will boost deliveries this winter season, as Equinor was allowed to raise gas exports from the Oseberg and Troll fields. But Russia is not rushing to book additional capacity via Ukraine, leaving the European gas market very tight.
Related: Oil Rebounds On U.S.-China Call Europe’s push for greener energy sources is the right thing to do, but not by putting the cart before the horse, according to Claudio Descalzi, CEO at Italy’s oil and gas major Eni.
“You cannot cut supply without also reducing demand,” Descalzi told the Financial Times.
“This is not something that is for a limited time, it’s structural,” the executive told FT, referring to the gas price spike.
Investment in supply is needed and will be needed in the future, regardless of calls for no more investment in fossil fuels, according to the world’s top liquefied natural gas (LNG) exporter, Qatar, and to the head of OPEC.
At the Gastech conference, OPEC Secretary-General Mohammad Barkindo said that even in the energy transition, “predictable investment in the oil and gas sector is required to address increasing global energy needs.”
The jump in natural gas prices is the market’s reaction to the push toward renewable energy sources, Barkindo told CNBC’s Dan Murphy at Gastech.
“I have talked about a new premium that is emerging in the energy markets that I term the transition premium,” Barkindo said.
OPEC’s chief noted that emotions have overtaken facts in the rush to keep fossil fuels in the ground.
“Emotions have overtaken industry facts,” Barkindo said on a panel at Gastech, as carried by Bloomberg.
“How do we change this narrative, because we’re losing it? Civil society and climate activists have taken over the space. Activist shareholders have held the industry nearly to ransom,” OPEC’s secretary-general added.
The surging gas prices are partly the result of underinvestment in the industry, also driven by the attempts at fast energy transition, according to Saad al-Kaabi, Qatar’s Energy Minister and CEO of Qatar Petroleum, the world’s top LNG exporter.
“There’s a euphoria around the energy transition that’s forcing companies not to invest,” al-Kaabi said.
“There is a huge demand from all our customers, and unfortunately we cannot cater for everybody. Unfortunately, in my view, this is due to the market not investing enough in the industry,” al-Kaabi said on the sidelines of Gastech, as carried by Reuters.
As the low wind power generation in Europe has shown this year, renewable energy cannot replace fossil fuels overnight, and investment in natural gas will be necessary for years to come in order to avert the next gas crisis.
By Tsvetana Paraskova for Oilprice.com
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