Original article: MBI Tradenews Energy
The Group is represented, via subsidiaries, in 13 countries, and is active on 27 natural gas markets and represented on 22 international trading hubs. In 2022, the volume of traded gas including futures amounted to 109 billion cubic metres and the volume of traded electricity including futures reached 67 terawatt hours.
Currently, the quantities of LNG needed for Germany are primarily obtained through spot trading, according to Selbach-Röntgen in an interview with MBI TradeNews Energy. This means, though, that the pricing remains dependent on the demand on Asian markets. In addition, producers hesitate to make the necessary big investments to develop new areas, based on a demand which is reflected in short-term trading.
Purchasers need long-term security of supply
But it is not only the producers, but also the purchasers who need longer-term security of supply at affordable prices for their business operations. The conclusion of long-term LNG contracts is naturally politically challenging for a government who has taken up the cause of ending the use of fossil energy sources, concedes Selbach-Röntgen. In this debate, one could first point out that even new partners could join in long-term contracts like these if gas procurement has become dysfunctional for their own business. The contracts can be passed on under certain criteria.
According to Selbach-Röntgen, it is more important to combine the subject of hydrogen start-up with the aspect of the longer-term purchase of LNG. This could happen, for example, if industrial companies commit to, for instance as an initial voluntary quota, obtaining a steadily increasing, contractual quantity of hydrogen as well as LNG. A method like this would significantly strengthen security of investment for the production of green hydrogen and consequently also the availability of appropriate quantities.
Selbach-Röntgen considers the construction of LNG terminals in Germany to the extent planned to be correct. The economic losses of having terminal facilities which are too scarce are higher than an expansion which is perhaps too lavish. “But just constructing LNG terminals does not help much,” says the CEO. “The plants need to be filled with life; long-term contracts with corresponding volumes are needed.” He adds that Germany got through the last winter with a lot of good luck. The situation with regards to a possible shortage situation will probably be better in the coming autumn than the previous winter. “But the situation is still not relaxed.”
Even the switch to green hydrogen is only making slow progress, according to Selbach-Röntgen. “Hydrogen is not yet available in sufficient quantities in the short-term and will remain more expensive compared to natural gas. We need an honest debate about the implementation of the hydrogen strategy.” Europeans are in competition here with the US, who have made faster headway thanks to the Inflation Reduction Act. This includes the availability of expertise and talents as well as the availability and construction of electrolysers, where Europeans have to join the queue behind the US players.
No liquid trading for hydrogen in the coming years
MET is currently co-operating with other market participants to discuss a necessary market design and product approaches for hydrogen trading. But the CEO says that liquid trading cannot be expected in the coming two to three years. In the current situation many industrial groups and municipal utilities are still reluctant when it comes to purchasing even small quantities of hydrogen over a longer-term period with binding effect.