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Some countries cannot afford gas to turn into a niche industry

Coal mines closures, the decommissioning of nuclear power plants, the volatility of renewable energy sources were mentioned among the main causes of the recent record-high energy prices. Whatever the reason, one thing is sure: the offer could not meet the ever-growing demand.

However, another cause was mentioned at Flame, Europe’s largest and most influential meeting place for the global gas industry: the lack of investments in the gas sector. Indeed, electricity, led by renewable power, continues to take the largest share of overall supply investment. The International Energy Agency (IEA) expects renewables to account for 70 per cent of 2021’s total of 530 billion US dollars spent on all new generation capacity. 

For Pablo Galante Escobar, Global Head of LNG & EMEA Gas and Power at Vitol, the gas sector has been demonised, something that, together with a very cold winter and the usage of storage for heating in the months of April and May led to disruptions everywhere in the world and, consequently, to high energy prices.

“There is the possibility that this winter will be even colder, therefore there won’t be enough gas storage to supply international markets like Europe and Northern Asia,” he said. “So there could be even a scenario when prices will spike even higher than they are right now.”

However, for Christina Verchere, Chief Executive Officer at OMV Petrom, this is not the case in Romania, where gas can replace coal and improve the overall economic prosperity, considering that the country has the lowest GDP per capita in the EU.

“It is important that the Fit for 55 package will allow each Member State to path their journey,” she underlined. “Romania has a desire to change its energy mix but you have to be able to drive the economic prosperity at the same time and not everybody has the luxury to be in the Western part of the world.”

Referring to the recent acquisition of ExxonMobil’s share by Romgaz in the Neptun Depp project, Mrs Verchere confirmed that OMV Petrom will take over as the operator, but she reminded us that the company is still waiting for a change in the offshore law which is still uncompetitive.

Christina Verchere andPablo Galante Escobar at Flame.

“Also, we still have people not connected to the grid in Romania so we need to give them access to energy and heating and it is an important part of the energy transition as well,” she added.

Indeed, the industry needs clarity. For Niek den Hollander, Executive Board Member at Uniper SE, the current legislation is focused on providing long-term clarity for investors but a huge step forward is also needed for new technologies, for example, hydrogen.

“It is important to develop a demand when it comes to technologies like hydrogen,” he pointed out. “If we don’t develop the demand, the transition will take longer and it will be more expensive and the longer we postpone it the later we will reduce emissions.”

Also, Mrs Verchere agreed on the importance to act now.

“We need to get on with the transition and we cannot do it overnight, due to the fragility of the energy system” she concluded. “We all want to change but we have to do it in a responsible way otherwise we will have high prices and disruption in supply and the general public doesn’t want that from the energy system. We have to incentivise zero-carbon policies but not demonise natural gas because it creates uncertainty.”

And while the situation varies from country to country, with different conditions of the supply side and different availability of infrastructure, Mr den Hollander found that there is one fit-for-all strategy: guarantees of origins which will promote cross border trade and certainty of the industry.

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