At the 2024 Cedigaz seminar, one of the key messages from gas suppliers is the need for a regulation that is more supportive of natural gas. Why is this so important now?
From the point of view of a midstream company, it is very important to have a clear, stable legislative and regulatory framework when it comes to investments that aim to bring affordable energy to end-users. We need to have stability in the long run otherwise some projects can be undermined by sudden regulatory changes.
Indeed, regulation is a key variable to be factored in when drafting or outlining long-term scenarios as it typically supports or undermines the financing of a project.
The European Hydrogen Backbone (EHB) initiative brings together 33 energy infrastructure operators in the EU to create an adequate pipeline infrastructure and help develop a competitive low-carbon hydrogen market. How would you describe the progress made since its vision was published in 2020?
There is real progress from the side of the gas industry. TSOs have been pushing for more than 40 concrete projects to qualify as PCIs (Projects of Common Interest). This is not the result of modelling analysis or scenarios, but of on-the-ground vendors’ quotes and pre-feasibility studies. Some of these projects have already taken FID in the Netherlands and in France and the other projects are making the necessary progress.
Didier Holleaux addressing the audience at the Cedigaz seminar 2024
At the 2023 seminar, there were a lot of concerns regarding the capacity of European gas companies to sign new long-term contracts to secure additional supplies in the wake of the energy crisis. Such concerns seem to have eased this year. Has this changed?
After the crisis, some companies have taken different strategies. Some of them secured a very large share of new long-term deals and still want to rely on long-term contracts. Others in Europe, particularly the ones that burnt their fingers in this crisis, are far more reluctant to sign new long-term contracts because they have been under pressure from their shareholders to avoid being dependent on new long-term deals which made their life difficult in the wake of the war. Therefore, they will tend to rely far more on spot markets, even if they know that in times of severe crisis, they may face difficulties.
We do see more diverging strategies amongst companies, and that’s perhaps one of the lessons drawn from the past year. This very much depends on the kind of risk that companies’ shareholders are prepared to accept.
Another key factor depends on the location of your customers and where you are based as a supplier. Clearly, if you are close to a node of the network, you can import from very different places and diversify your supply under your long-term contract. In other places, you may have difficulties in finding a diversity of sellers willing to propose long-term contracts.
