Europe has come to terms with high gas prices for another six months
The period of high gas prices in Europe will probably last until the summer of next year. In April 2022, when the heating season in Europe ends and gas is pumped into underground storage facilities (UGS), prices will not fall below $ 1,000 per 1,000 cubic meters. m, according to Director of Research Vygon Consulting Maria Belova. She commented on the statement of the head of the Federal Network Agency of Germany (Bundesnetzagentur, BNA) Johann Homann that the decision to certify the Nord Stream-2 export pipeline will not be made in the first half of 2022. A representative of the Bundesnetzagentur on December 16 confirmed.
Homan’s statement caused another rise in spot gas prices in Europe. According to the ICE exchange, on December 16 at the TTF hub in the Netherlands, the price of January gas futures rose by 3, 2% to $ 1595 per 1,000 cubic meters. m. Prior to that, during the day the price rose above $ 1600 and even reached $ 1732 (although the peaks in early October, when at certain times on TTF quotes were approaching $ 2000 per 1000 cubic meters, it was still far). June and July futures rose much more, to $ 887, by 8.4 and 8.5%, respectively.
“Last fall, given the shortage of gas supply in the market, prices rose due to the approach of winter,” said Belova. – In mid-2022, the market will again live in anticipation of the cold, and the arrival of additional volumes of gas, in particular LNG [сжиженного газа], do not have to wait. She also added that in this case the receipt of new volumes is possible only if Gazprom increases the additional pumping through Ukraine, but the company has no grounds for such a step now. According to Belov, pending the launch of the project, prices may remain at more than $ 1,000 per 1,000 cubic meters. m even with favorable weather factors.
The key issue for the market will not be the exact launch date of Nord Stream 2, but whether Gazprom will significantly increase supplies to Europe (including through Ukraine) if the certification process is so long, said the group’s senior director. natural resource Fitch Ratings Dmitry Marinchenko.
“Now we assume that the average price in 2022 will stabilize at about $ 300 per 1,000 cubic meters. But if supplies from Russia do not grow, prices could be significantly higher, ”the expert said.
The statement of the German regulator will lead to an increase in spot prices, according to a leading analyst at FNEB Igor Yushkov. He stressed that the market did not expect the commissioning of Nord Stream-2 until the end of the current heating season, but the BNA report created additional tensions in the market, causing prices to go up.
Homann said in a statement that Nord Stream 2, an operator of Nord Stream 2 AG (controlled by Gazprom), had applied for certification and was registered in Switzerland. In order to implement the project, the company needs to have a subsidiary that owns a section of the gas pipeline in Germany.
“Nord Stream AG started, of course, this transformation and informed us about it. So we stopped the certification process. It will be restored when we receive the relevant documents. If they come to us, it is difficult to make a forecast, the certification process will begin, ”Homan said. He also added that part of the deadline for consideration of documents has already been used, after the submission of documents the review process will resume.
A spokesman for Nord Stream 2 AG confirmed that the company was re-registering in accordance with the requirements of the German authorities, but declined to comment on the procedure. Vedomosti sent inquiries to Gazprom and its partners in the Nord Stream-2 project (Engie, OMV, Shell, Uniper and Wintershall Dea). A OMV spokesman said he “could not comment on statements from regulators, political institutions or other companies.”
The completion of the Nord Stream-2 certification is now influenced by the time when Nord Stream 2 AG will be able to establish a subsidiary in Germany, said Ivan Gudkov, an associate professor at MGIMO. He stressed that the specific dates for the completion of the process depend on the model of separation. For example, as part of a legal separation, the operator must have its own staff, management, accounting, IT service, said the lawyer.
Companies will need to register, properly register employees, including foreigners from non-EU countries, open bank accounts (which, given the sanctions risks is not so easy and fast), work out cooperation with insurance contractors, explains the lawyer Art De Lex. Marat Samara. In addition, the lawyer mentioned that the requirements for the company and its divisions may differ in different countries of Germany. “Stricter models prescribe more radical measures up to the need to change the owner, but the application of such measures to the investment project risks conflict with the rights and legitimate interests of investors,” said Gudkov.
The German regulator announced the start of certification on September 13, but in mid-November the process was suspended. In addition, according to the EU’s antitrust Third Energy Package, the pipeline operator will need to prove that it is a supplier-independent entity. Then the BNA representative said that the regulator has four months for certification – i.e. until January 8.
Dmitry Magonya, the managing partner of Art De Lex, told Vedomosti that the regulator’s decision could be made earlier, but it would largely depend on the position of the German federal government, which may undergo adjustments after the September 26 Bundestag elections. Following the election, the CDU (CSU) failed to gain the right to form a new cabinet, and power shifted to a coalition of the SPD, the Greens, and the FDP, less loyal to Nord Stream 2. He added that after the BNA decision, the issue will be referred to the European Commission.
Homan’s statement is not the first statement to provoke a rally in Europe’s gas market in recent days. Prices rose after a statement made on December 14 by the new German Foreign Minister Annalena Burbock that there were no grounds to launch Nord Stream-2. High quotes are kept against the background of low occupancy of European repositories. According to Gas Infrastructure Europe (GIE), on December 14, 666 billion cubic meters were pumped into Europe’s underground storage facilities. m of gas (61, 45% of the maximum).
Belova believes that even in the most favorable scenario at the end of the heating season, European underground storage facilities will be filled by no more than 35%, and if the winter is cold, the figure will be even lower.