This week, two giant transport tankers loaded with liquefied natural gas (LNG) will glide down the Milford Haven waterway and unload their cargo at the South Hook Gas Terminal in west Wales.
Energy industry leaders will converge 320 miles away in London, at a critical crossroads for the gas sector, as the Will Pride and Stiklstad dock, arriving from the United States and Norway respectively.
Executives gather at a Mayfair hotel for the annual International Energy Week conference amid tense debate over the pace of oil and gas companies' transition to low-carbon energy. Last year, then BP chairman Bernard Looney (since the opening) defended fossil fuel spending over the sound of raucous protests outside. Activists then detonated smoke bombs at a black-tie dinner and forced executives out onto the street in front of demonstrators.
Speakers include the chief economists of BP and Shell, executives from France's Engie, Britain's Octopus Energy and oil trading company Vitol, and representatives from the Labor Party, which is being pursued for watering down energy policy funding. They include shadow energy secretary Ed Miliband. green policy.
A key issue at the conference will be the role of gas in the energy transition and the impact of falling wholesale prices. In recent weeks, natural gas prices in Europe have fallen to levels not seen since before Russia's invasion of Ukraine in February 2022, further exacerbating an already escalating energy crisis. Gas is trading at €23/mWh, the lowest price since May 2021 and down from the high of €319/MWh in August 2022.
Many factors contribute. “European demand remains very low as a second warm winter gets underway,” said Tom Marzek-Manser, head of global gas analysis at consulting firm ICIS. “Typically, large amounts of gas are used to heat homes and businesses across Europe, but not this year.” Warmer, windier weather means more electricity needs to be generated by gas-fired power plants has also declined, and the low-voltage wind power industry has entered the market. As a result, storage levels in European gas facilities remain high.
The return to near-normal levels of nuclear power generation after the shutdown of France's reactors also reduced gas demand. Concerns about a recession in gas-hungry Germany and the impact on the manufacturing industry from the cost of living crisis also had an impact. The Red Sea disruption has not caused the price hikes that some feared, in part because Qatari gas that reaches Europe via the route is typically shipped at the end of the year. be.
UK industry regulator Ofgem acknowledged last week that the wholesale price easing had spilled over into household spending. From April, the quarterly price ceiling is expected to fall by £238 to £1,690, fall further from July, and then rise towards the end of the year.
The sharp drop in prices has sparked debate over the future of the world's gas storages, terminals and pipes. In the UK, the long-term shift away from gas-fired power generation has seen major companies exit the sector and smaller private companies retain it. The government's pledge to decarbonize the electricity grid by 2035 (and Labor's by 2030) has raised concerns about a supply gap to meet the explosion in electricity demand. Industry players argue that pragmatism trumps goals, and many gas-fired power plants will almost certainly remain in place until the 2030s, ensuring they stay lit.
Analysis by consultancy DNV shows that most British homes will still rely on natural gas-fired boilers, despite a target of net-zero emissions by 2050. Hydrogen has been proposed as an alternative by the powerful gas infrastructure lobby, but was condemned by the National Infrastructure Commission.
In the United States, where large fossil fuel mergers are occurring one after another, President Joe Biden has suspended LNG exports to examine their environmental and economic impacts. In Europe, after Russia cut piped gas supplies in 2022, there was an urgent need to further build infrastructure to bring in transported LNG. An even larger floating terminal is being built in Germany.
“The investment opportunity still exists,” Marzek-Manser said. “The EU has committed to withdrawing from Russian gas, so this is an important wedge for LNG to replace it.”
Floating terminals under construction could be “unplugged” and relocated to other parts of the world if they become unprofitable in the future, Marzekmanser added.
The tightening could occur when Russia's Gazprom's five-year transportation contract for gas pipes through Ukraine ends at the end of 2024.
The conference will feature high-profile discussions on the future of natural gas, examining prospects for methane emissions reductions and low-carbon gas alternatives. Environmentalists will be hoping it's more than just hot air.
