EUROPEAN ENERGY CRISIS

S&P Global - December 10, 2024 - Europe's ability to compete for global LNG supplies will be key in navigating the ongoing energy crisis, as global demand is expected to maintain growth over the next 5-10 years, according to the head of German energy company SEFE.

Speaking at the World LNG Summit in Berlin, Egbert Laege, CEO of state-owned SEFE, said Europe was not yet out of an energy crisis that began with Russia's invasion of Ukraine in 2022.

The Continent's pivot to LNG -- particularly Germany's rapid implementation of import infrastructure -- had helped temper price risk, diversify sources, and re-balance markets that were now "working," according to Laege.

This has, however, come at a price, he added.

"Europe is losing its competitive edge in the global economy, and that is something we should be very concerned about," he said.

Laege noted while Europe was a demand center, it "was not the only demand center", indicating Asian appetite for LNG was showing no signs of slowing.

"The world is not waiting for Europe," he said, adding that Europe would have to continue to ensure its own supply security.

It comes as spot prices for LNG for delivery into Asia remain at a premium to Europe.

The Platts benchmark JKM price for delivery into Northeast Asia was assessed Dec. 9 at $14.81/MMBtu, compared with a Northwest Europe LNG marker of $13.74/MMBtu the same day, S&P Global Commodity Insights data showed.

Demand growth

Laege said there was "massive demand growth" for LNG expected in the next 5-10 years on a global scale, driven by growing populations and economies, as well as fossil fuel substitution and LNG's role in decarbonization.

Meeting this demand, US production of LNG was expected to "perfectly cover" global appetite, complemented by growing output in the Middle East and Australia, according to Laege.

Further out, Laege said global LNG demand could more than double by 2050.

"This makes it even more important for Europe to make sure it has a competitive role in this global market," Laege said.

The EU's competitiveness was a central component of a September report published by former Italian premier and European Central Bank chief Mario Draghi.

The report, which set out a new industrial strategy to revitalize EU industry, highlighted the bloc's need to increase energy security and reduce dependencies.

For LNG, it noted that while Europe was now the world's largest LNG importer, its potential collective bargaining power was not being sufficiently leveraged, leaving the bloc exposed to spot prices and potentially greater volatility.

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