Europe’s plan to replace Russian gas faces hurdles

Europe’s plan to replace Russian gas faces hurdles

Energy, Uncategorized















Bloomberg

Europe’s ambitious plan to walk away from Russian natural gas and replace a chunk of it with tanker-borne imports faces a major obstacle: getting it to where it’s needed most without huge price discrepancies.

Even as record amounts of liquefied natural gas (LNG) land on Europe’s shores, the lack of interconnectors from key import terminals in the west means gas can’t easily reach countries in the east that are more reliant on pipeline supplies from Russia.

As a result, short-term gas prices in Britain, France and Spain have tumbled to as little as a third of those in markets including the Netherlands and Germany, according to Citigroup. Such discrepancies, particularly to the Dutch trading hub where Europe’s benchmark rates are set, are making it harder to trade the fuel and likely to keep prices volatile until supply choke points are resolved.

“There is infrastructure missing for the west-to-east flows,” said Marco Saalfrank, head of continental Europe merchant trading at Axpo Solutions AG in Baden, Switzerland. “So LNG, in short, is not the only solution to replace Russian gas because of the bottlenecks.”

The price divergence and infrastructure constraints