EU Could Use Newly Launched Gas Cartel To Purchase Hydrogen

The European Union could use its newly launched gas cartel to purchase vast quantities of hydrogen and other critical materials, Bloomberg has reported. The bloc had set a goal of aggregating enough demand to fill 15% of its gas storage sites across the bloc, equivalent to around 13.5 billion cubic meters, and has managed to exceed expectations with its gas stores nearly 80% full.

"We have to invest much more in critical raw materials to have the strategic supplies we need. We need to diversify the suppliers," Commission Vice President Maros Sefcovic has told Bloomberg.

Rocked by one of the worst energy crises in living memory, the European Union launched a gas buyers' cartel in 2022 and started issuing tenders for supplies. According to Sefcovic, some 50 gas suppliers and large industrial gas consumers in the EU immediately expressed interest in being part of the bloc's joint gas buying effort. A key objective of the whole endeavor is to keep gas prices low by buying in larger volumes. 

Although natural gas prices are a lot lower than they were a year ago, the EU still needs to buy vast quantities of gas to refill its storage, with such a move likely to drive prices higher. Sefcovic said that the EU plus four neighboring countries will require 24 billion cubic meters of natural gas over the next three years to meet their needs. Further, Europe has been paying a considerable premium for its gas compared to the U.S. and China, and this needs to change if the region is to remain competitive on the global stage, "What is increasingly important is that we have to deal with prices. We can't power our economy at such a huge price differential compared with the U.S. or China," Sefcovic told Bloomberg.

Three years ago, the European Union set out its new hydrogen strategy as part of its goal to achieve carbon neutrality for all its industries by 2050. In a big win for the hydrogen sector, the EU has outlined an extremely ambitious target to build out at least 40 gigawatts of electrolyzers within its borders by 2030, or 160x the current global capacity of 250MW. The EU also plans to support the development of another 40 gigawatts of green hydrogen in nearby countries that can export to the region by the same date. 

The success of the gas club provides a blueprint for the EU to use to purchase hydrogen and other materials it needs for the energy transition.

Alex Kimani for Oilprice.com

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