Key Takeaways:
- There is a general consensus at the conference that demand destruction is expected to be slower than what is stated such policy as RepowerEU. This is aligned with what RBAC has stated since 22Q3 that our expected reduction of European demand is slower than IEA’s scenarios due to execution risk of policy targets.
- European gas players are struggling with the emphasis on short term needs for gas supply security, and signaling a long term commitment due to policy uncertainties. In general, the views for market interventions by policy makers are more reluctant. They stated that the necessary measures for protecting the consumers, but it sends signals for shrinking margins and volumes for the gas sector which hurts the credibility for long term investment interests for gas and LNG in Europe.
- The renewable build out takes longer than expected while gas is expected to last longer as a bridging fuel under the energy transition. An offshore wind farm takes 10 years to build currently.
- Intermittency of renewables is mentioned frequently as a concern with rising electricity price.
- US LNG is a good supply source for Europe, and most of the cargos are FOB basis which allows further diversion and hedging. However, there are concerns about Asia’s rising demand (especially China’s demand for LNG).
- In the regulatory sector, there is a clear tendency to push more hydrogen and moving away from gas, and also away from U.S. exports. That was clearly different standpoint compared to the commercial sectors.
- Bigger and integrated players with assets in multiple segments of the value chain and diversified asset portfolio across continents will win over time in the gas sector for Europe, and it is more challenging for mid-cap and smaller players in a long sun-setting market environment for gas with limited diversification options.
Questions? Contact us to find out how we can help you navigate this challenging environment. Also, for free insights, see our Visual Analytics page here.
