Demand destruction hits European gas market

: Natural gas
21/10/14

Gas demand from industry in major European gas-consuming countries has begun to fall as an increasing number of plants that produce steel, chemicals and other products either curtail output or close in response to record-high wholesale prices.

According to Argus analysis, industries in Germany, the Netherlands, Spain, Italy, France, Poland, the UK and Portugal consumed a combined 3.27 TWh/d of gas last week — the lowest for calendar week 41 since at least 2017, including during the Covid-19 lockdowns of 2020 and 2021.

That weekly figure is about 8pc lower than the 3.57 TWh/d consumed in the same period last year and 4pc below the three-year average of 3.42 TWh/d.

As of last week, industrial gas demand in these eight economies this year had averaged 3.55 TWh/d, slightly higher than the same period in 2020 and 2017, but shy of the averages of 3.56 TWh/d in pre-Covid 2019 and 3.69 TWh/d in 2018.

In recent months, industrial gas consumption trends in the eight countries — which represent the bulk of that type of European demand — have defied seasonal norms and suggest that a variety of energy-intensive firms will continue cutting operations in the coming weeks and months (see European, German demand graphs).

In a typical calendar year, gas consumption by major European industrial economies follows a U-shape, hitting a post-new year high around February, gradually declining toward an annual low during summer holidays in July and August, then recovering to a second peak before Christmas.

This year, industrial gas use generally followed seasonal trends until mid-September when demand abruptly fell by over 100 GWh/d to low levels unseen in recent years, before continuing on a diminished upward trajectory.

At that time, wholesale gas markets were rallying, with front-month benchmarks at the Dutch TTF and UK NBP hubs steadily rising toward peaks of €117-120/MWh on 5 October, in the face of winter supply concerns, low storage inventories in key markets and rallying LNG prices.

UK weighs on demand

While most countries have experienced lower industrial demand to some degree, the UK emerges as a driving force behind this wave of demand destruction, when established industrial consumers cut or effectively stop using gas (see UK demand graphs).

Rallying gas prices prompted a handful of industrial consumers across the continent to reduce operations last month, including CF Industries, which announced plans in mid-September to temporarily close two UK fertiliser plants.

Around the same time, while industries across Europe considered their options, a number of UK steel plants and Spanish silicon producer Ferroglobe either stepped down or idled plants, citing higher power prices, driven in part by costly in-feed from gas-fired plants across Europe.

Front-month gas prices have eased somewhat this week to €85-95/MWh, but remain more than four times higher than at the start of 2021. Accordingly, the spectre of demand destruction looms over the UK and its European neighbours, with Spanish steelmaker Sidenor Group announcing it would temporarily take its Basauri plant off line at the start of this week.

It is unclear how far European demand will fall, as different businesses are coping in different ways.

The UK-based Major Energy Users Council (MEUC), which represents large-scale consumers such as Network Rail and Transport for London, told Argus that while long-term energy supply contracts have helped businesses weather the storm, their forward positions are anything but certain.

"I am not aware of any member reducing output or closing, in fact in most cases they cannot contemplate doing so," MEUC technical director Eddie Proffitt said. "In most cases, members take a sensible approach to energy buying, hedging various volumes going forward... the increase is hitting them, but not for the whole of their bill."

But as fixed-price contracts near expiry, some MEUC members shopping for energy have only been able to source quotes from their current suppliers at "massive increases", he said. "There are even requests for deposits or parent-company guarantees," he added.

While certain industries, including glass making, are reportedly considering substituting fuel oil for natural gas in certain processes, sustained high gas prices suggest a combination of further demand destruction and higher retail prices for certain products.

by Jeff Kuntz

Weekly European industrial gas demand TWh/d

Weekly German industrial demand TWh/d

Weekly UK industrial gas demand mn m³/d

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25/04/15

VG begins contracted LNG deliveries at Calcasieu Pass

Houston, 15 April (Argus) — US LNG exporter Venture Global began deliveries of long-term contractual cargoes at its 12.4mn t/yr Calcasieu Pass terminal in Louisiana today after the facility started commercial operations, more than three years after producing its first LNG. "We are excited to reach this milestone and are grateful for our regulators and supply chain partners who have worked with our team to reach commercial operations as efficiently and safely as possible," said Venture Global chief executive Mike Sabel. But the long-delayed and highly contested start comes amid ongoing arbitration proceedings against Venture Global, which some customers including Shell, BP, Italian utility Edison and Spanish company Repsol argue was unjustified in deferring the contracted supplies (see offtakers table) . The LNG exporter originally sought to begin commercial operations in 2022 but cited impacts from Covid-19, two hurricanes and "major unforeseen manufacturing issues" related to one of the plant's heat recovery steam generators, equipment that helps power the facility. Because several of the plant's facilities, including the power island, were not officially placed in service with federal authorization, Venture Global maintained that the plant was not commercially operating — despite producing 444 cargoes totaling 28.2mn t of LNG (about 1.28 trillion cubic feet of natural gas) since its first in March 2022, according to Vortexa data. The start-up Tuesday comes on the final day before Venture Global could have lost control of the project. The company said in a December filing with the US Securities and Exchange Commission (SEC) that the agreement under which it had financed debt requires commercial operations to be completed by 1 June 2025. Should commercial operations have not begun 45 days prior to this date — which is Tuesday — then the agreement defaults, allowing "certain investors" to exercise control over the project. Before Tuesday, the company instead sold cargoes on the spot market for prices much higher than the terms of its offtake agreements. Calcasieu Pass produced its first LNG in January 2022 and exported its first cargo on 1 March 2022 — less than a week after Russia, then a key supplier of gas to Europe, invaded Ukraine. The facility produced its first LNG just 29 months after reaching a final investment decision (FID) on the project, compared with the industry average of four to five years. The timing of the project's start dovetailed with the war-driven volatility in the European gas market, helping Venture Global realize much larger profits than it would have under contracted volumes. The firm's liquefaction fees in 2023 and 2024 averaged $12.23/mn Btu and $7.28/mn Btu, respectively, compared with the average $1.97/mn Btu in its long-term deals, according to a company presentation in March. The lengthy commissioning process generated $19.6bn in revenue by the end of September 2024, Venture Global said in the December SEC filing. Shell estimated that Venture Global sold cargoes in 2023 at an average of $48.8mn per shipment, "raking in billions of dollars while shirking its contractual obligations", according to a filing with US energy regulator FERC in March 2024. Venture Global said in March that the customer arbitration cases are not likely to be resolved until after 2025. LNG facilities usually produce commissioning cargoes for a few months before beginning long-term contracts. But Venture Global has said its unique plant design, which uses a higher number of smaller, modular liquefaction trains compared with traditional trains, requires a longer start-up process. Calcasieu Pass LNG consists of 18 trains paired in nine blocks, and a similarly long commissioning period is expected at the first two phases of Venture Global's 27.2mn t/yr Plaquemines facility consisting of 36 trains. The company also has plans for an 18.1mn t/yr expansion at Plaquemines. An FID is expected in mid-2027, with first LNG production 18-24 months later. Venture Global estimated that its third LNG facility, the 28mn t/yr CP2 facility adjacent to Calcasieu Pass, could export up to 550 commissioning cargoes . The company expects to make an investment decision on the first phase of CP2 this year. By Tray Swanson Calcasieu Pass offtake deals Offtaker Volume, mn t/yr Contract length, yrs Shell 2.0 20 Galp 1.0 20 Sinopec 1.0 3 CNOOC 0.5 5 Edison 1.0 20 Repsol 1.0 20 PGNiG 1.5 20 BP 2.0 20 — US DOE Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

IMO GHG pricing not yet Paris deal-aligned: EU

25/04/14

IMO GHG pricing not yet Paris deal-aligned: EU

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Bio-LNG could boom by early 2030s under IMO deal

25/04/14

Bio-LNG could boom by early 2030s under IMO deal

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Shale patch on edge after tariff drama

25/04/14

Shale patch on edge after tariff drama

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Brunei LNG undergoes unplanned downtime

25/04/14

Brunei LNG undergoes unplanned downtime

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