European natural gas prices could more than double in 2024, Goldman Sachs says

The region's energy crisis will not find a 'sustainable solution' until 2025, says investment bank

An LNG ship arrives from Australia, at the Isle of Grain terminal, UK. PA

European natural gas prices could “more than double” next year due to shortages caused by a drop in Russian exports, Goldman Sachs has said.

Greater storage capacities and an unusually warm winter have contributed to a sharp fall in European gas prices over the last few months.

Dutch Title Transfer Facility gas futures, the benchmark European contract, was trading at €52.70 ($55.81) per megawatt hour on Friday.

Futures hit a record high of about €343 a megawatt hour in August last year.

Europe, which was severely affected by the cut-off of gas from Russia following the conflict, has managed to go through the winter without a major supply crunch.

However, the “structural deficit” in European natural gas balances has yet to be resolved and presents an upside risk to the region's gas prices, Goldman Sachs said.

“It is not until 2025 that we expect the European energy crisis to find a more sustainable solution, when the next wave of global liquefied natural gas supply projects, currently under construction, starts to come online,” said the investment bank.

The EU could fall short by about 27 billion cubic metres (bcm) of gas this year if Russian gas deliveries drop to zero and China’s imports of liquefied natural gas rebound to 2021 levels, the International Energy Agency said in a report last year.

European countries have signed several LNG import agreements with the US and Gulf countries over the past few months.

Last week, Adnoc and German power company RWE announced the delivery of the first shipment of LNG from the UAE to Germany.

Last year in November, QatarEnergy signed two sales and purchase agreements with ConocoPhillips to deliver up to 2 million tonnes per annum (mtpa) of LNG to Germany.

On Tuesday, Freeport LNG, which is the second largest US exporter of LNG, said that federal regulators had given the green light for a partial resumption of commercial activities at its Texas-based plant after a fire led to its closure in June last year.

The return of the plant, which can process up to 2.1 billion cubic feet of natural gas per day and export 15 million tonnes of LNG per annum, is expected to push up domestic gas prices.

According to Wood Mackenzie, the resumption of operations at the Freeport plant will allow the US to become the top LNG exporter this year, surpassing Qatar and Australia, with an annual export capacity of 89 million metric tonnes.

US LNG capacity could expand annually by 70 million metric tonnes to 190 million metric tonnes by the end of the decade as several new projects come online, the energy consultancy said.

“Record-high prices and the need for energy security drove buyers, which included portfolio players and US producers and infrastructure companies, to seek long-term US LNG deals in 2022 and created huge contracting momentum for projects,” said Giles Farrer, head of gas and LNG asset research for Wood Mackenzie, in a report earlier this week.