Gas consumption in the chemical sector in France fell by 18pc in January-April from the same period in 2022, and decarbonisation projects could continue to weigh on gas consumption in the coming years, according to industry association France Chimie.
Consumption in the sector totalled 9.84TWh in the first four months of this year, down from 12.07TWh a year earlier, according to data from gas grid operator GRT Gaz, which covers 94pc of French demand. Chemical industry consumption in April was the lowest for any month since at least January 2008 (see chemical industry consumption graph).
Reductions in consumption have likely come from firms reducing production, rather than from fuel switching or energy-efficiency measures, France Chimie told Argus.
The association estimates gas consumption across the entire sector to represent around 45-50 TWh/yr. And it expects annual demand in the sector to fall by 4.3 TWh/yr by 2025-26, and by 11.4 TWh/yr by 2030, because of fuel substitution towards bioenergy, waste combustion or electricity. Residual coal demand of roughly 4 TWh/yr will be 75pc gone by 2025-26, and entirely gone by 2030, it said. But electricity consumption of 22-23 TWh/yr could be boosted in the coming years by more electrification, according to the association.
Energy subsidies introduced by the French government were of limited use last year, the association said. Stringent rules to access the subsidies meant that very few businesses were able to take advantage, and for those that did only a small proportion of their energy bills were covered. Reforms have improved the subsidy scheme this year, with many businesses able to have roughly 20-25pc of their energy bills paid. But the scheme is still inadequate to allow businesses to compete on a level playing field with international competitors in the US or China, where energy costs are far lower, France Chimie said.
The effect of fuel switching since 2021 has been marginal in the French chemical industry, reaching at most several hundred GWh/yr, the association said. And the scope for gains in energy efficiency is limited, as the industry has already taken significant energy-efficiency measures in recent decades, reducing its energy intensity by 40pc since 1990. Any more reductions would most likely come from smaller businesses producing speciality products, rather than larger, gas-intensive manufacturers.
That said, gas-intensive industries such as fertilisers may tend to be more responsive to potential decreases in wholesale gas prices than manufacturers of finished products, according to France Chimie. Many plants producing ammonia for use in fertilisers across Europe shut down in summer 2022, as gas prices soared. But Norwegian fertiliser producer Yara in February estimated that 70pc of European ammonia capacity was on line, up from an Argus-estimated low of 50pc in August 2022.
Gas-intensive industries tend to have short order books and low forward visibility of demand for their products, leading them to hedge relatively little of their consumption, France Chimie said. And gas prices have tended to fall at delivery in recent years, making it more advantageous in the long run for gas-intensive companies to purchase more spot products. Since 1 October 2015, when Argus extended its assessment to the Peg year-ahead contract, the day-ahead price has averaged €31.76/MWh, compared with €33.75/MWh, €35.70/MWh and €32.80/MWh for month ahead, quarter ahead and year-ahead contracts, respectively.
Smaller industries that consume less gas tend to hedge the highest proportion of their consumption, the association said. But these businesses hedge forward, at most, for 2-3 years, and so very few will still be covered by hedges taken out before prices began to rise in mid-2021, France Chimie said.
Industrial gas demand at 15-year low in April
Gas demand for all industry in France in April was the lowest for any month since at least January 2008.
Industrial offtakers in GRT Gaz's zone consumed 7.35TWh in the month, excluding power generation and district heating (see French industrial demand graph).
The chemical sector accounted for the biggest year-on-year decline. Consumption of 1.96TWh was 560GWh less than in April 2022, and a 15-year low. Consumption in the paper industry also hit a 15-year low at 517GWh, 280GWh lower than in April last year.
That said, consumption increased year on year in the refining and petrochemicals sectors in April, and edged up in agriculture and automobiles.
