■ how about the increase of European natural gas price since 2021, the price of natural gas in Europe has experienced a substantial rise. In 2021, the price of natural gas futures of TTF in the Netherlands and NBP in London has exceeded US $70 / mmbtu (about 218764 yuan / ton). As of April 7, 2022, the Dutch TTF price was US $33.34/mmbtu (about 1041942 yuan / ton), up 396.87% year-on-year; The price of NBP in London was US $30.53/mmbtu (about 954124 yuan / ton), up 363.28% year-on-year. The price of TTF in the Netherlands and NBP in London reached 5.2 times and 4.8 times that of Henry hub respectively. The price difference between European natural gas and American natural gas is large, which brings opportunities for international natural gas trade.
■ why does European natural gas price continue to rise 2021: the price of natural gas in Europe has risen many times since 2021: from the beginning of 2021 to the beginning of October, the continuous rise of natural gas price in Europe is mainly affected by extreme weather, the extension of winter and the continuous drought and high temperature in summer. At the same time, due to the relatively poor wind resources in Europe in 2021, the power generation capacity of renewable energy is lower than expected, driving the demand for natural gas power generation higher than expected; Since November 2021, natural gas prices have continued to break new highs, mainly due to the shutdown of important gas transmission pipelines from Russia to Europe and the impact of the Russia Ukraine incident, resulting in a strong demand for natural gas inventory replenishment in Europe, leading to a further rise in gas prices.
■ the importance of European natural gas in energy consumption “carbon neutrality” policy continues to promote, and the proportion of natural gas as a bridge of energy transformation in Europe’s energy structure has steadily increased. According to BP data, in 2020, Europe’s natural gas consumption accounted for 25.25% of the total energy consumption, with a year-on-year increase of 1.37 percentage points, while oil and coal consumption decreased by 2.48 and 1.16 percentage points respectively. Although renewable energy is developing rapidly, due to the volatility and intermittence of its power generation, natural gas is still irreplaceable as a clean, efficient, stable and low-carbon energy. From the downstream natural gas consumption structure, Europe’s natural gas demand is mainly concentrated in industry and housing, accounting for 70% of the total natural gas consumption in Europe.
■ major sources of natural gas supply in Europe Europe’s main natural gas producing countries are Norway, the UK and the Netherlands. Among them, the North Sea oil field is the core natural gas source in Europe. However, after years of oil and gas exploitation, many natural gas fields in the North Sea have been facing depletion. In recent years, Europe’s natural gas production has continued to decline, mainly relying on imports. Russia is the largest source of natural gas imports in Europe. According to BP data, Russia’s pipeline gas accounts for more than 50% of Europe’s total natural gas imports; Imported LNG accounts for about 35%, mainly from the United States and Qatar.
■ how much impact will the interruption of Russian pipeline gas have on the supply of natural gas in Europe 2022 in March, Russia announced that it would require Russia’s “non friendly countries and regions” to pay for natural gas in rubles, otherwise it would stop natural gas supply. At present, the maximum gas transmission capacity of Russia’s seven natural gas pipelines to Europe is 265 billion m3, and the supply of pipeline gas in Russia will be 167.7 billion m3 in 2020. If European countries refuse to pay in rubles, leading to Russia’s cut-off of natural gas supply to Europe, it may lead to a natural gas gap of more than 160 billion cubic meters in Europe. Although the United States has promised to export at least 15 billion cubic meters of LNG to the EU in 2022, it is still unable to fill the natural gas gap in Europe.
■ what difficulties will Europe face if it increases LNG import if Europe makes up for the decline of Russian pipeline gas imports by importing LNG, it will still face a series of difficulties: 1) Europe must increase its LNG receiving capacity, and it still takes time to build LNG terminals, so it is difficult to solve the short-term natural gas gap; 2) Most of the US LNG exports have been allocated in the form of long-term agreement when the project is put into operation. Europe needs to purchase the US LNG incremental gas in the short term through spot purchase; 3) In the context of covid-19 epidemic and carbon neutralization, the investment intensity of natural gas exploitation has decreased, and it is difficult to find a large number of alternative gas sources in Europe.
■ investment suggestions: under the influence of the Russia Ukraine incident and the influence of supply and demand factors, the European natural gas price continues to rise. Due to the uncertain international situation and the low European natural gas inventory, the rise in natural gas price may continue in the future. At the same time, due to the large difference in natural gas price between Europe and the United States, it will bring international trade opportunities, At the current time point, China’s leading natural gas companies [ Enn Natural Gas Co.Ltd(600803) ] are recommended Enn Natural Gas Co.Ltd(600803) has a complete industrial chain of upstream, middle and downstream natural gas, and the upstream gas supply sources are diversified. The midstream plans to acquire 90% equity of Zhoushan LNG terminal, and the downstream urban fuel business has a national layout. At present, the company has accumulated a large number of high-quality industrial customers for decades, actively expanded to the field of comprehensive energy services, and further made positive contributions to the company’s performance. At the same time, the company has long had a layout in the international natural gas market through the LNG terminal, which is expected to benefit from the opportunities in the field of international natural gas trade under the background of rising natural gas prices in Europe.
■ risk tips: risk of continuous rise in natural gas price, geopolitical risk and less than expected risk of policy promotion
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