Europe’s largest energy operator says Russian aggression will keep global gas prices hiked into 2024
Germany’s E.ON is concerned by the outlook for the European winter and said energy prices could stay elevated for several more years.
Global energy prices will stay high into the European winter later this year as uncertainty over the continent’s sources of replacement gas outside of Russia puts markets on edge, German utility E.ON says.
The EU on Wednesday urged countries to cut their gas use by 15 per cent amid the ongoing threat of Russian supply reductions, and invoked the slogan “Save Gas for a Safe Winter”.
E.ON — Europe’s largest operator of energy networks and owner of a stake in the Nord Stream 1 gas pipeline which moves gas from Russia to Germany — said it was concerned by the outlook for peak demand during winter.
“Obviously the situation is very tight and tense. The two big unknowns are whether we are going to get a cold winter and what is (Russian President Vladimir) Putin going to do,” E.ON chief operating officer Patrick Lammers said during a visit to Australia.
“We know for sure that Putin is going on with this war because many of the countries we operate in, border with Ukraine. But if this winter gets very cold, then we will have to switch off industries and that’s very clear.
“And that will hurt enormously for the economic welfare of Europe.”
Russia was the biggest supplier of gas to Europe but was also the world’s fourth largest LNG exporter — its largest market being Japan. The reverberations from the global energy shock have spread through Australia, where spot prices have soared to trade at four to five times normal levels.
Germany is building a string of LNG import plants but Mr Lammers said there was no quick fix to the international energy crisis.
“I see high prices right out into 2023 and even into 2024,” he said.
The E.ON executive visited Australia this week to tour Fortescue Metals Group’s facilities. Mr Lammers’ company in March agreed to a deal with the iron ore company’s hydrogen arm,
Fortescue Future Industries, to buy five million tonnes a year of green hydrogen by 2030.
The first 200,000 tonnes is due for delivery by 2024-25.
The pact was seen as a way to help Germany deal with Russia’s war on Ukraine, which has squeezed energy supplies across Europe.
High fossil fuel prices have boosted the economics of green hydrogen, according to Mr Lammers, and the two companies were now working on a series of technical issues to meet deadlines later this decade.
“We need to look at how do we scale up the green electrons into green hydrogen and move it over to Europe,” he said.
“There are a lot of steps and design thinking that needs to be happening. When we have it all clear, maybe there needs to be other partners in there as well and then we will sign everything and get cracking.
“We have to build some of the terminals and then the question is: do you go through with hydrogen or do you take ammonia? So we have to make a choice there.”
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