Saturday , 2 December 2023
Home Global Economy War in Ukraine causes gas prices to rise
Global Economy

War in Ukraine causes gas prices to rise

The German chemical industry is warning of skyrocketing gas prices in view of the war in Ukraine. A gas shortage, which is accompanied by rising prices, could be problematic for energy-intensive industries in particular, said Wolfgang Große Entrup, general manager of the German Chemical Industry Association (VCI), the German Press Agency: "In this case, chemical companies are threatened with exploding prices for natural gas an already historically extremely high price level." Due to its high energy consumption, the industry suffers like no other from the already high raw material prices.

In the gas market, prices have already skyrocketed on fears of shortages: Dutch gas futures trading on the Title Transfer Facility (TTF) in the Netherlands, the most liquid virtual natural gas trading hub in Europe, cost 135.73, according to Bloomberg news agency euros per megawatt hour and thus increased by 53 percent within one day.

The energy supplier E.On explained that it is currently not possible to make any statement about the price development for end consumers. The company pointed out that a renewed increase in the prices for electricity and gas is currently being seen on the wholesale markets – starting from a "level that is already known to be very high". It remains to be seen how the development will develop in the long term: "There are many indications that prices will probably remain high for a longer period of time."

Gas supply secured for the time being

At the same time, the industry association Zukunft Gas emphasized that the gas supply is secure: "We are monitoring the current supply situation very closely and can say, at least in the short term, that the gas supply is secure for Germany," said board member Timm Kehler. He emphasized that the supply of natural gas to private customers in particular is guaranteed: "Due to their particularly protected legal position and the diversified gas purchases from other countries, they do not have to worry."

The gas storage association INES confirmed this. Conditions for the gas supply to remain secure are continued mild temperatures and sufficient available imports of liquefied natural gas (LNG). The gas storage facilities in Germany were recently about 30 percent full: "The filling levels are still low, but no longer historically low."

However, the association expects an "unprecedented stress test" for the supply of the EU in the event of a longer stoppage of all Russian gas supplies. Association Managing Director Sebastian Bleschke expressed this assessment: "In the event of a long-term failure of all Russian gas supplies until next winter, the gas supply can be maintained completely and without interruption at any time depends on many factors." A final assessment is not possible at this point in time.

More gas in Ukrainian pipelines again

The Russian state-owned company Gazprom pointed out that the gas supply agreements would be complied with. In addition to the Nord Stream 1 gas pipeline, which routes Russian natural gas directly to Germany through the Baltic Sea, gas from Russia is also transported to Germany via pipelines through Ukraine. According to Bloomberg, these gas deliveries are even higher than recently. Russia had drastically reduced deliveries through Ukraine in recent months. This is shown by data from the Slovakian gas transport company Eustream AS.

Russia is Europe's most important gas supplier, but has been reducing its supplies to the EU for months: "Last year, an average of 10 7 cubic feet per day of natural gas delivered – compared to 11.8 cubic feet per day in 2020 and 14.1 cubic feet per day in 2019," reports independent energy expert Hans-Wilhelm Schiffer.

Qatar could supply more LNG

The EU has therefore been working on alternatives such as increasing deliveries of LNG for some time. According to its ambassador in Berlin, the Gulf state of Qatar is ready to supply larger amounts of gas to Germany. "Qatar can help Germany to diversify its energy sources," said Abdullah bin Mohammed Al Thani. "What we need now is direct communication between the decision-makers in Qatar and Germany to find a way out of the crisis."

However, Qatar's Energy Minister Saad bin Sharida al-Kaabi said earlier this week that neither Qatar nor any other individual country has the capacity to replace Russian gas supplies to Europe with liquid gas. He referred to existing long-term contracts in his country with other customers. Of the contracted gas, only 10 to 15 percent could likely be diverted, the minister said.

This is also confirmed by the expert Schiffer: "Russian deliveries of natural gas, not only to Germany but also to other European countries, are very significant, so that both the capacities at LNG import terminals and the natural gas volumes to be provided from other natural gas exporting countries via LNG would hardly be sufficient to compensate for a complete failure of Russian supplies." According to Schiffer, the majority of LNG is currently imported from the USA, Qatar and Russia: 26 percent of all LNG purchases by the 27 EU countries "come from the USA – followed by Qatar with 24 percent and Russia with 20 percent."

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