“Europe needs to rethink its energy mix,” said Luis Sanchez, head of LNG at MET Group, summarizing the conference’s conclusions, which focused on the transformation of gas supply following the Middle East crisis. Several participants argued that the market is still underpricing risk. At the same time, demand flexibility in Asia, such as fuel switching from gas to coal, and a strong U.S. supply are easing the situation.
“Tighter market conditions could persist for longer than previously expected,” said Gergely Molnár, gas analyst at the International Energy Agency (IEA), talking about the main trends in the fragmented geopolitical environment. He added that the strong increase in new liquefaction capacity is expected to offset the loss of Qatar and Emirati supplies over the medium term.
Zoltán Áldott, chair of IOGP Europe, voiced industry concerns that the EU Methane Regulation could put Europe’s energy supply at risk: “The EU risks losing up to 43% of its gas supply (114 bcm) and up to 87% of its oil supply (9.8 mbd).”
Sanchez, focusing on regional perspectives, emphasized that CEE countries may need to plan for LNG supply diversification and, in terms of infrastructure, prioritize the liquidity of inland interconnections.
Pricing in Supply Shock
Prices were one of the main topics of the discussion on the security of supply in the new geopolitical context. Ralf Dickgreber, head of global LNG & Biomass at ENGIE, and Eszter Szekeres, CEO of MET Hungary, both expressed concern that the market has not yet properly priced in the supply shock. Szekeres added that Europe will always pay the highest price for LNG, as it is less price-sensitive than Asia.
“The most urgent question for Europe today is: when will the market start pricing the risk for next winter higher than the short-term risk we are currently seeing?” he asked
Gábor Orbán, CEO of MVM ONEnergy, highlighted the issue that buyers have to pay high prices for summer gas, which will consequently result in much higher prices for customers in winter.
Franck Neel, Member of the Executive Board at OMV Petrom, spoke about the tariff pancaking of the Vertical Corridor, meaning that the route from Greece to Ukraine is currently among the most expensive on the market in terms of transmission tariffs.
In her keynote speech, Caroline Savage, Chargé d’Affaires at the US Embassy in Budapest, outlined the four principles of US LNG: reliability, diversification when traditional supplies are unavailable, historic US investments in export capacity and competitive pricing.
However, the current crisis is pushing gas prices higher, as Jefferson Edwards, Vice President at Shell Energy, also emphasized: “If the crisis lasts, Europe will need to bid cargoes away from Asia to fill storage.”
TSO Insight
Audience members also gained insight into the perspectives of transmission system operators, who emphasized the importance of making the best possible use of existing infrastructure, as well as of the new infrastructure currently under development.
“All the bad news has a positive effect on FGSZ,” said Szabolcs I. Ferencz, CEO of FGSZ Hungarian Gas TSO, optimistically, highlighting that the operator is “in a unique position to change the dominant flow every five years.” He also spoke about the diversification of supply following the phase-out of Russian gas. “We have to prepare ourselves that from 2027 onwards we will have to supply the country from Croatia, Romania and Austria.”
Returning to the current crisis, Vladimir Malinov, CEO of Bulgartransgaz, pointed out that peace will not have an immediate impact on prices and that nobody can predict how insurance companies will price the risk associated with the Strait of Hormuz.
Konstantinos Sifnaios, vice president and managing director at Gastrade, said that there is a shift in the mindset of buyers, who were previously focused on the short term in relation to LNG.
Dániel Garai, CEO of CEEGEX, highlighted risk management in a volatile gas market, saying: “Our estimates suggest that more than 100 billion euros in collateral is locked in the clearing system in the European gas market alone. While new challenges are emerging, we have still not resolved old challenges, even though there is an opportunity to do so.”
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