Energy Suppliers Hit Pay Dirt in EU’s Surprise Deep FreezeBy and
U.K. power generation from gas hits record high, exports rise
LNG sellers see unexpected windfall from cargo competition
It only took a few cold weeks to break Europe free from its three-year-long energy glut.
From Houston to Oslo and Moscow, companies that sell natural gas have seen sales and exports surge at the start of the year as Europe scrambles to secure enough supplies to manage the harsh weather. After forecasts for a mild winter, January temperatures plunged enough to freeze rivers and cut off supplies for tens of thousands of homes.
The revenue boost offered a reprieve from a price collapse that’s lingered since 2014, with supply overwhelming demand during the three warmest years on record. While consumers and industry will be hit by higher bills after February power prices in Germany surged to a record and U.K. gas traded near a four-year high, energy companies are enjoying a winter windfall.
“We have had quite a few hard years in terms of mild winter and this is a big positive deviation,” said Elchin Mammadov, a London-based utilities analyst at Bloomberg Intelligence. “It will have an impact on first-quarter results.”
German utilities have run their available plants at full throttle as temperatures plunged to a countrywide average of minus 4 Celsius (25 Fahrenheit) some days last week. Energie Baden-Wuerttemberg AG, Uniper SE and other utilities were also asked to activate some reserve plants, resulting in payments of more than 19 million euros, according to a Bloomberg estimate based on output and a government document on compensation.
Utilities and German grid companies declined to comment or couldn’t comment on overall costs. Temperatures in the country are seen remaining below zero through the weekend, compared to a 10-year average of about 1 degree Celsius.
Britain and Scandinavia, which have mostly avoided abnormally low temperatures, have been exporting electricity. The U.K. is generating its highest-ever volume of power from natural gas to send to France where prices have soared, also exacerbated by lower nuclear availability. Exports are at their highest level since at least 2010, even with flows on a cable linking the countries cut 50 percent through February.
Norwegian power shipments to the Netherlands jumped 14 percent this year through Jan. 24, according to data from the Nord Pool AS exchange. With gas-fired electricity generation reaching new heights in the U.K. last week, shippers of the fuel to both power producers and utilities have also been boosted with higher-than-forecast sales.
“I can’t remember a start to the gas year that’s been this good,” said Frode Leversund, the chief executive officer of Gassco AS, which sends Norwegian fuel to the continent and the U.K. through its 5,000 miles of pipelines.
The company set a new daily record on Jan. 12, exporting gas worth as much as 76 million pounds ($95 million) based on U.K. prices that day.
Russia’s Gazprom PJSC also supplied record levels in the first 15 days of January. The Moscow-based exporter, which meets about a third of European Union’s needs, boosted deliveries to the region and Turkey by 26 percent.
With gas being the fastest rising fuel source for the world, sellers of liquefied natural gas have also benefited from a 33 percent increase in European prices since the beginning of December, according to data from World Gas Intelligence.
Cheniere Energy Inc., the Houston-based exporter of LNG produced from U.S. shale gas formations, shipped two cargoes into the Mediterranean for the first time within the space of a week. One went to Spain and the other to Turkey, as both nations struggle with shortages. The U.S. producer has up until now mainly supplied South America, Middle East and Asia.
Cheniere spokeswoman Faith Parker didn’t respond to requests for comment.
With more than two months of winter to go, and European stockpiles of gas at less than half full, further price surges are possible, according to Massimo Di’Odoardo, the London-based research director for European gas at industry consultant Wood Mackenzie Ltd.
“The weather this year has really surprised people,” he said in an interview in London.
— With assistance by Elena Mazneva, Jesper Starn, Ladka Mortkowitz Bauerova, Rachel Morison, Mikael Holter, and Tino Andresen