The current high European gas prices can lead to "dangerous" demand destruction in Europe, the CEO of Spanish gas infrastructure group Enagas said Sept. 23.
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Speaking on the sidelines of the Gastech gas conference in Dubai, Marcelino Oreja said the current "price stress" was to be expected given that oil and gas producers have been encouraged to stop investing, which has led to lower output.
"As prices go up, there is demand destruction," Oreja said. "That is very dangerous for Europe as that can drive employment destruction and industry destruction," he said.
European gas prices have soared in recent weeks, building on the sustained rally since the start of 2021, with concerns over supply this winter adding a significant risk premium to prices.
S&P Global Platts assessed the Dutch TTF day-ahead contract Sept. 22 at Eur68.58/MWh ($23.59/MMBtu), more than six times higher than the Eur11.40/MWh price a year ago.
In the past few weeks, there have also been the first signs of industrial activity being suspended due to the high gas price.
Fertilizer manufacturers -- for whom gas can account for up to 80% of their costs -- in the UK and across Europe have idled production, and there have been warnings that other industries could follow.
Oreja also said that global LNG demand was increasing much more quickly than had been expected.
"And there is not enough supply for that," he said.
"I hope [prices] will come down. It's very bad for all of us," he said.
The global LNG market has been rocked by outages at a number of liquefaction plants, leading to a tight supply-demand balance, and spot LNG prices have risen strongly along with European gas prices.
The S&P Global Platts JKM spot Asian LNG price was assessed Sept. 22 at $27.27/MMBtu, up from just $4.78/MMBtu a year ago.
Oreja said that Spain took gas from 13 different countries, giving it a diversity of supply, but that the country had very little interconnection with the rest of Europe, making it something of an energy "island."
"We rely on our own connections with Algeria and our [LNG] regasification terminals," he said.
Spain is also working to replenish its storage facilities, with Oreja saying he hoped levels would reach 80% before the start of the winter season.
According to data from Gas Infrastructure Europe, Spain's storage sites were 72.5% full as of Sept. 21.
"We are increasing by as much as we can," Oreja said.
Oreja also said he expected a hydrogen market in Europe to develop more quickly than thought. "Everyone is saying hydrogen is going to come in 20 years from now, but I think it's going to be quicker," he said.
"Some industries are going to be pushing very hard to receive green hydrogen," he said, adding that it was already possible to blend hydrogen into the gas grid at up to 20%.
Dedicated hydrogen pipelines could also be possible in the next three to four years, he said.
The development of the hydrogen market in Europe, however, would depend on how the sector is regulated. There is a need, he said, for "clear regulation" without which there would not be enough investment and financing for hydrogen projects.