Gas association: LNG infrastructure only way to secure cheap gas prices

A gas hob.
A gas hob. Source: Priit Mürk/ERR

The Estonian Gas Association finds the European gas market effective and not in need of intervention from the European Commission. In order to boost supply security and reduce volatility of prices, the EU should offer LNG infrastructure support instead.

The gas association criticized European Union proposals outlining communal purchases on the EU gas market, market protection measures and preparations for solving energy emergencies.

"We do not understand the problem the EU is trying to solve. Effects of the Ukraine war have seen the EU gas market and participants effect a major transformation to replace Russian gas the share of which used to be around 40-43 percent before the aggression," the executive manager of the Estonian Gas Association, Heiko Heitur, wrote in a letter to Minister of Economic Affairs Riina Sikkut.

The price of natural gas has been volatile on the TTF market due to external factors, such as the availability of gas, infrastructure explosions, unexpected supply problems, disproportionate demand in the summer of 2021 etc. An uncertain market situation and demand outperforming supply creates a situation where some market participants are willing to pay more for gas than others, the association wrote.

Spot prices prices down to €20-30

"This does not mean the market is not functioning. It is working better than ever before. While the price climbed as high as €350 per megawatt-hour this summer, it has come down to around €100/MWh by now as storage is full and deliveries of LNG to Europe have grown. Spot prices are even hovering around the €20-30 mark. This means that gas is available and uncertainty is down as consumption has fallen and alternatives have been found for Russian gas."

LNG infrastructure projects will be coming into their own in the near future and three or four years from now. This is forecast to have a positive effect in terms of increased supply and a more stable market that should further lower prices.

"Based on this, we firmly believe that the European gas market is working and does not require EU intervention on all levels detailed in the notice."

The Estonian Gas Association finds that in order to boost supply security and reduce volatility of prices, the EU could offer support for investing in LNG infrastructure as that is practically the only way to stabilize the market and ensure favorable prices.

"The faster the EU can develop infrastructure necessary for receiving LNG, the more gas will reach the market. We need to keep in mind that the EU is competing with other world economies. Our markets need to be attractive to LNG producers and sellers, which is why prices must be governed by market logic that the EU itself promotes," Heiko Heitur remarked.


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Editor: Marcus Turovski

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