Latest market news

Long-term contracts needed to stabilise gas prices: MET

  • Market: Hydrogen, Natural gas
  • 28/03/24

Germany and Europe need more LNG and business-to-business long-term contracts to even out supply shocks and stabilise gas prices, even as demand is unlikely to reach historical heights again, chief executive of Swiss trading firm MET's German subsidiary Joerg Selbach-Roentgen told Argus.

Long-term LNG contracts have a "stabilising effect" on prices when "all market participants know there is enough coming", Selbach-Roentgen said. He is not satisfied with the amount of long-term LNG supply contracted into Germany, arguing that stabilisation remains important even now that the market has "cooled down" after the price shocks of 2022.

Long-term contracts are important for the standing of German industry, Selbach-Roentgen said — not to be reliant on spot cargoes is a matter of global competitiveness for the industrial gas market, he said. The chief executive called for more long-term contracts in other areas as well, such as for industrial offtakers, either fixed price or index-driven.

Since long-term LNG contracts are concluded between wholesalers and producers, the latter need long-term planning security for their projects, which usually leads to terms of about 20 years. But long-term LNG contracts in general do not represent a major risk for MET nor for industrial offtakers in Europe, Selbach-Roentgen said. LNG is a more flexibly-structured "solution" to expected demand drops in regard to the energy transition as the tail end can be shipped to companies on other continents such as Asia if European demand wanes, he said.

Gas demand is not likely to recover to "historical heights" again, mostly driven by industrials "jumping ship", Selbach-Roentgen said. When talking to large industrial companies, the discussion is often about the option that they might divert investments away from the German market as the price environment is "not attractive enough" for them any longer in terms of planning security, the chief executive said. This trend started out of necessity in reaction to the price spikes but may now be connected to longer-term "strategic" considerations, he said. In addition, industrial decarbonisation — as well as industrial offtakers' risk aversion because of the volatile gas market following Russian gas supply curtailments — leads companies to invest less into longer-term gas dependencies in Germany, Selbach-Roentgen said.

In addition, MET advocates for a green gas blending obligation of 1-2pc green gas or hydrogen, in line with legislative drafts under discussion by the German government. This has already met with interest by offtakers, despite uncertainties around availability and prices, and would provide a regulatory framework that allows firms to prepare for the energy transition, Selbach-Roentgen said.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
08/11/24

Austria to ask EU to act if German gas levy not removed

Austria to ask EU to act if German gas levy not removed

London, 8 November (Argus) — Austrian energy regulator E-Control will "take all necessary steps" at an EU level if it looks like a law to abolish Germany's storage levy on gas exiting the country will not be passed in time, it told Argus today. E-Control will take action in close co-operation with the Austrian ministry, the European Commission and energy regulators' group Acer before the end of December if needed, the regulator's executive director, Alfons Haber, told Argus . The regulator is "very much concerned that the announced abolishment of the German gas storage levy at cross-border exit points is at risk now", Haber said. But E-Control remains optimistic that the German government will fulfil its promise to abolish the gas storage levy from 1 January 2025. The collapse of the German government earlier this week has made it uncertain whether parliament can pass the required bill in time. The German storage levy — set at €2.50/MWh at present — was introduced in 2022 to cover losses incurred by German market area manager THE to fill gas storage sites ahead of the winter. But the levy made the German import route uneconomical for its southern and eastern neighbours, which last year asked the EU to intervene. Germany agreed to scrap the levy on cross-border interconnection points in May , saying at the time that the change would have to be ratified by an act of parliament. The levy "severely impacts cross-border gas flows in Europe and has strong negative effects on the CEE region", Haber told Argus . Particularly in light of the risk that Russian gas transit through Ukraine would end after 1 January, German imports would become more significant for Austria, in which case the levy would "hurt" even more, Austrian market area manager AGGM board member Bernhard Painz said. Scope for levy law to be passed in time The incumbent government hopes to pass some bills "that cannot be delayed" before the end of this year, the chancellor said on 6 November. Economy and climate minister Robert Habeck on 7 November said he expects the interests of the government and the "democratic opposition" to align on energy security. But Habeck does not expect "a great deal of helpfulness", and "it remains to be seen" whether some decisions can be made together with the opposition on a case-by-case basis, he said. Major opposition party CDU today voiced a desire for an earlier election date in German parliament, asking Scholz to schedule a vote of no confidence as early as next week. This would drastically reduce the chance of any bill being passed before the end of this year. The chancellor today said he was open to a "sober" discussion about the election date. Scholz expressed hope that the "democratic factions of parliament" could agree on which laws can still be passed this year. This common understanding could determine the "right moment" to trigger a vote of no confidence, he said. Only the chancellor can call a vote of no confidence under the German constitution. The opposition can do so only if they elect a new chancellor at the same time. Bill is not controversial among democratic parties Democratic parties showed no opposition to the bill to change how the storage levy is charged during its first reading in parliament, suggesting it could be passed as one of the bipartisan projects if it is high enough on the agenda. The bill, introduced to parliament in August , was framed as a way to align the storage levy with EU rules. The government asked for it to be expedited. The upper house of parliament, the Bundesrat, passed the law on to the lower house without comments on the proposed changes. During the first reading of the bill in the lower house, no democratic party raised any concerns about the law. CDU instead framed it as an attempt to fix what the government had done wrong in 2022. Then-governing parties the Greens, SPD and FDP were in favour of the law in light of its positive effects on EU solidarity. BMWK was not immediately available for comment on whether the storage levy was on the list of laws that the government would try to push through before the end of this year. By Till Stehr and Brendan A'Hearn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Find out more
News

Canada climate plans not equally at risk post-Trudeau


08/11/24
News
08/11/24

Canada climate plans not equally at risk post-Trudeau

Toronto, 8 November (Argus) — Canada's climate policies will be overhauled if prime minister Justin Trudeau loses an upcoming federal election, but the Conservative Party might not move to roll back all of the programs. Trudeau over nine years in office has pushed through a raft of carbon pricing policies, cracked down on provinces with insufficiently ambitious plans, and even started a global "challenge" to spur more jurisdictions to price emissions. But Canada's policies have exacerbated cost-of-living concerns at a time when voters across the world are punishing incumbents for inflation, and Conservative leader Pierre Poilievre has barnstormed the country with a pledge to "axe the tax." An election must happen no later than October 2025, and the ruling Liberals are down significantly in polls. "We are going to see change, significant change," said Lisa DeMarco, a senior partner at the law firm Resilient and a member of the International Emissions Trading Association board at the Canada Clean Fuels and Carbon Markets Summit in Toronto, Ontario, this week. What "axe the tax" might mean in practice is uncertain. Inevitable targets are the country's federal fuel charge, currently at C$80/t ($57.54/t) and set to gradually increase to C$170/t in 2030, and a recently proposed greenhouse gas emissions cap-and-trade program for upstream oil and gas producers. But other policies, especially those with industry support, could remain. The country's distinct system for taxing industrial emissions, which includes a federal output-based pricing system that functions as a performance standard, "will likely be untouched," said former Conservative leader Erin O'Toole. A point of debate at the conference was what Poilievre might do with the country's clean fuel regulations, which function similarly to California's long-running low-carbon fuel standard and have boosted biofuel usage in the country. The policy is "certainly not at the top of the list" of Conservative priorities, said Andy Brosnan, president of low-carbon fuels at environmental products marketer Anew Climate. But that does not mean it will escape scrutiny. Conservatives could tinker with the program or push through more muscular changes like excluding electric vehicles, said David Beaudoin, chief executive of the climate consultancy NEL-i. "We should expect that regulation will be maybe not dismantled but somehow changed, perhaps fundamentally," Beaudoin said. In the gap left by the federal government, provinces could make up the difference with their own climate programs, panelists agreed. Quebec for instance has a linked carbon market with California, and British Columbia has its own low-carbon fuel standard. But policymakers should heed the lessons of Trudeau's declining popularity and reorient how they approach climate policy, O'Toole argued. "Try to be minimally disruptive on economically vulnerable citizens," he said. "Try not to pit industry against industry or region of the country against region." By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Gatun Lake to reach all-time high in Dec: Panama Canal


08/11/24
News
08/11/24

Gatun Lake to reach all-time high in Dec: Panama Canal

London, 8 November (Argus) — Water levels at Gatun Lake that supplies the Panama Canal will reach an all-time high in December, according to forecasts from the Panama Canal Authority (ACP). This is a significant shift from the start of the year, when water levels were at the lowest January level since 1965 following an extensive El Nino induced-drought in 2023 ( see chart ). ACP expects water levels at the lake to hit 88.9ft on 7 December and then 89ft on 18 December, which if confirmed would break the 88.85ft record registered on 5 December 2022. This time last year water levels were in an 80-82ft range, the lowest on record for the November-December months, which prompted ACP to enforce rigorous transit restrictions that sent shockwaves through LPG and other shipping markets . The change in water levels reflects the transition from El Nino to La Nina, which typically brings more rainfall to Panama. Higher water levels from the onset of the rainy season in May allowed the ACP to gradually lift transits back to full capacity by August . This has helped keep auction prices for transits at the larger Neopanamax locks near initial $100,000 bidding levels — and even outpace demand, with many slots turned away without receiving any bids . Argus ' average weekly auction prices have ranged from $112,900 to $209,389 since July, settling at $136,750 by last week. This is a complete turnaround from a year earlier, when shippers paid as high as nearly $4mn for a single transit. On average, Neopanamax auction prices cost $2.1mn in November 2023. This probably helped support Panama Canal's profits in its financial 2024 year, to $3.45bn from $3.2bn a year earlier despite a 20pc fall in transits because of water-saving restrictions implemented. The ACP said the results reflected strategies such as the "freshwater surcharge, improved water yield through structural and operational upgrades, system enhancements for reservations and auctions, and maritime service operations." Water levels are forecast to gradually decrease again from 23 December with the start of the dry season, which usually lasts by May. By Yohanna Pinheiro Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Argentina’s YPF sees jump in shale oil output


08/11/24
News
08/11/24

Argentina’s YPF sees jump in shale oil output

Montevideo, 8 November (Argus) — Argentina's state-owned YPF saw output of unconventional crude surge by 36pc to 126,000 b/d in the third quarter of the year compared to a year earlier. YPF's third quarter statement put total production at 559,000 b/d of oil equivalent (boe/d) with crude at 256,000 b/d, up by 8pc, and natural gas at 40.3mn m³/d, or 253,000 boe/d, an increase of 7pc, and 49,000 boe/d of natural gas liquids, up by 4pc. Unconventional crude accounted for 49pc of overall output. It was 39pc of total production a year earlier. YPF is the major player in Vaca Muerta, Argentina's unconventional formation that holds an estimated 16bn bl of crude and 308 trillion cf of gas, according to the US Energy Information Administration. The formation is at the heart of YPF's plans for Argentina to produce 1mn bl of crude and export up to 30mn metric tonnes/yr of LNG by the end of the decade. YPF is now Argentina's largest crude exporter, dispatching an average of 40,000 b/d in the third quarter, nearly all of this going by pipeline to neighboring Chile, according to Federico Barroetavena, chief financial officer. He said the company invested $1.35bn in the third quarter, with more than 70pc on upstream. It drilled 50 wells in the third quarter. YPF is moving ahead with its southern Vaca Muerta oil pipeline as it looks for partners for the full project. It has completed 50pc of the first 130km (81.4mi) segment. The second 440km, as well as storage tanks and a monobuoy platform, will require $2.5bn. The company anticipates construction to start in the first quarter of 2025. The initial capacity will be 180,000 b/d in 2026, increasing to 500,000 b/d in 2027 and, eventually, to 700,000 b/d. YPF is also the largest shareholder, with 37pc, in the Oldelval pipeline from Vaca Muerta to the coast. It is undergoing an expansion to 530,000 b/d in 2025. The state-owned energy company, Enarsa, completed in October the reversal of the country's northern gas pipeline to move Vaca Muerta gas to the north of the country. It will move more than 15mn m³/d of gas to northern Argentina. It previously moved gas from northern gas fields, now depleted, and Bolivia, to the capital, Buenos Aires. By Lucien Chauvin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Coalition collapse worries German hydrogen sector


08/11/24
News
08/11/24

Coalition collapse worries German hydrogen sector

Hamburg, 8 November (Argus) — Germany's hydrogen industry is concerned that the collapse of the country's coalition government this week could further delay the sector's progress. Germany's ambitious plans for a clean hydrogen economy were already progressing more slowly than many had expected, and the collapse of the governing coalition comes at a time when the hydrogen sector is desperate for more clarity on key legislation. Chancellor Olaf Scholz's Social Democratic Party and the Green Party plan to rule as a minority government for the time being, after the third partner, the pro-business Free Democratic Party, exited the coalition on the back of disputes over how to finance the 2025 budget and how to tackle Germany's economic downturn. Scholz intends to ask for a confidence vote on 15 January, which in turn could lead to elections in March 2025, six months ahead of schedule. This prospect of an early election has raised concerns about progress on key legislation, including on energy policy and more specifically hydrogen. The coalition's end "has come at an inopportune time and is creating considerable uncertainty", German hydrogen industry association DWV said. "Political stagnation is looming" and delayed progress on key policies could "jeopardise the ramp-up of a hydrogen economy and potentially set its start back by months or years," it said. Scholz said he will seek votes on urgent laws before Christmas "but failed to make a clear commitment to key projects for the hydrogen economy", DWV said. The industry body listed several legislative initiatives planned or underway that need addressing. These include the so-called hydrogen acceleration act — which is designed to streamline permitting procedures for electrolysis plants, import terminals, storage facilities and other infrastructure — and the power plant strategy which involves the development of hydrogen-ready gas-fired power plants and for which first tenders are planned for the first half of 2025. The industry is still waiting for a dedicated storage strategy which is long overdue and was most recently promised for "this autumn". And while Germany has until 21 May next year to transpose key rules from the EU's revised Renewable Energy Directive (RED III) into national law, industry participants have called for this to be done as soon as possible to provide certainty, especially around mandates for renewable hydrogen use in industry . DWV also reiterated calls for the implementation of a certification system for renewable hydrogen and derivatives, having previously said that this will be critical to unlock support for producers through greenhouse gas emissions certificates. Turn the page Persistent uncertainty over future budgets raises questions over subsidy mechanisms that are long overdue and which Berlin is counting on to reach its 10GW electrolyser capacity target for 2030. This includes tenders for 3GW of so-called "system-serving electrolysis capacity", intended to provide flexibility in the wider electricity system. These were due to be launched last year and run steadily until 2029 for 500 MW/yr of capacity. The economy and climate protection ministry told Argus in late August that it was planning to consult on the tender framework this autumn, but it has yet to do so. The DWV acknowledged that "the coalition, despite all the criticism, has also done a lot of good for the hydrogen ramp-up". Progress on the planned pipeline network, the carbon-contracts-for-difference scheme and the power plant plans has been made this year. But despite progress in some areas, Germany's 10GW electrolysis capacity is "far out of reach", according to David Hanel, head of public affairs in Germany for French hydrogen project developer Lhyfe. The "current political crisis" offers opportunities for a reset, especially a "reality check" on the effectiveness of support measures that have been drawn up for the sector, including the European hydrogen bank, Hanel said. A change in government following the election is highly likely. Polls show the conservative opposition sister parties CDU and CSU firmly in the lead, although with a projected 30-33pc share of votes they too would need coalition partners. A change in power is unlikely to lead to a major shift in Germany's course on hydrogen. But it could be good news for proponents of "blue" hydrogen made from natural gas with carbon capture and utilisation or storage (CCUS) or "turquoise" gas-based hydrogen made via pyrolysis. In a "discussion paper" on energy published earlier this week, the CDU/CSU called for a "fast, multi-coloured and broad" approach to hydrogen. In order to advance plans, barriers for domestic gas-based hydrogen production with abated emissions have to be removed, the parties said. The incumbent coalition had stressed openness to imports and use of hydrogen from different sources , including gas-based pathways, but limited funding support for domestic production of renewable hydrogen. A change in government could also mean that the recently-approved hydrogen network will be revised. The CDU/CSU has called for extensions to "cover all main economic regions," focusing specifically on the southern states of Baden-Wurttemberg and Bavaria . By Stefan Krumpelmann Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Generic Hero Banner

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more