Europe’s Gas Prices Surge 13% As Russia Reduces Nord Stream Flow
Russia’s Gazprom said on Tuesday that it would limit natural gas supply via the Nord Stream pipeline to Germany by 40 percent compared to planned flows because of a delay in equipment repairs, sending European gas prices surging by 13 percent. Gazprom said today on its Telegram channel that Siemens had delayed the return of gas compressor units from repair, and technical issues prevented it from sending the planned volumes of natural gas to the biggest gas link to Europe. Only three compressor units can currently be used to ship gas westwards from the Portovaya compressor station in the Baltic Sea, Gazprom says. Gas supplies to the Nord Stream gas pipeline can currently be provided in the amount of up to 100 million cubic meters per day, compared with a planned volume of 167 million cubic meters per day, the Russian gas giant said. The lower supply of gas via Nord Stream to the biggest European economy, Germany, sent Europe’s gas prices surging by double digits on Tuesday, with the gas price at the Dutch TTF hub, the benchmark gas price for Europe, up by 13 percent and the UK gas prices rising by 11 percent around noon in Europe. Russian gas deliveries to Europe—not counting the countries already cut off from Russian gas—have already been down after Ukraine stopped last month flows from Russia to Europe at the Sokhranivka point due to “the interference of the occupying forces in the technical processes.” Sokhranivka is one of the two transit points of Russian gas via Ukraine to Europe, and thus supply was cut off for a third of the gas transiting Ukraine onto Europe. Separately, Nord Stream, which bypasses Ukraine, is expected to undergo planned regular maintenance for two weeks in July, when there will be no flows to Germany, Klaus Mueller, the president of Germany’s network regulator Bundesnetzagentur said on Monday.
Saudi Arabia Bets Big On Blue Hydrogen
While the world begins to build the infrastructure of a future hydrogen economy, the economics of global trade in carbon-free hydrogen are becoming more clear. Among countries expected to find significant opportunities in that future market is Saudi Arabia. According to a recent report from a notable Riyadh-based research institute, green hydrogen produced from electrolysis could begin to ship to the Port of Rotterdam in 2030 at prices quite competitive with European hydrogen, depending partly upon the shipping method used. The researchers also see significant potential for hydrogen in KSA’s domestic industry. Hydrogen and hydrogen-based fuels could replace gray hydrogen, strengthening Saudi export potential in a range of products as more costs are imposed on carbon emissions worldwide. They see great potential for both blue (with carbon capture) and green (with renewable energy) hydrogen, with technology and production costs gradually falling for both types. Their outlook for blue is more positive than that of some recent analyses, which foresees green hydrogen beating blue on price in many regions of the world by 2030. But Saudi Arabia’s apparent advantages in producing low-cost hydrogen of both types may allow it to develop each for the long term. Therefore the researchers advocate a balanced approach, anticipating regional specialization within the country. Realistic assumptions The report, “The Economics and Resource Potential of Hydrogen Production in Saudi Arabia” by the King Abdullah Petroleum Studies and Research Center (KAPSARC), was issued in March. The KAPSARC researchers look at realistic cost scenarios based on realistic assumptions about the price of natural gas in Saudi Arabia, and the cost of electricity from renewable sources. The anticipated costs and capacity factors of electrolysis systems are also carefully considered. Saudi Arabia is already a large consumer of hydrogen for its refinery and chemicals industries; primarily ‘gray’ hydrogen produced with high carbon emissions. It is by far the cheapest way to produce the gas at about $0.90/kg. But costs of blue and especially green hydrogen are expected to decline substantially in the next few years. Blue hydrogen gains an advantage from Saudi Arabia’s huge production of natural gas and its closed market for it. KSA neither exports nor imports natural gas and maintains a low price, currently at $1.25/MMBtu. At this price, the cost of producing blue hydrogen could fall from the current $1.34/kg to $1.13/kg by 2030. This assumes ongoing cost reductions in carbon capture & storage (CCS) methods as these scale up. The cost of green hydrogen is highly dependent on the cost of electricity from renewable sources and electrolysis. It is $2.16/kg today based on an electricity price of $18.3/MWh (an average of auction prices for new solar projects in Saudi Arabia). The researchers see that this cost could fall to $1.48/kg by 2030, if renewable energy costs fall to $13/MWh. The cost of green hydrogen production in KSA could fall further to $1/kg by 2050. Reaching the vaunted $1/kg target assumes electrolyser capital costs drop to $400 per kilowatt, with renewable energy costs falling below $10/MWh, both realistic scenarios. The researchers see an enormous advantage in KSA’s ability to achieve high capacity factors in its production of renewable electricity. They assert that capacity factors can reach 60% in the production of renewable power in Saudi Arabia; that it is possible with a PV-Wind hybrid system. In fact, large areas of the country, especially in the western region, are favorable for diurnal (day and night) solar and wind energy production. This greatly surpasses, for example, wind power in Europe with capacity factors of approximately 35%. With this advantage, however, a carbon price in some form will still need to be imposed in Saudi Arabia. The report says that green hydrogen will be competitive with grey hydrogen by 2030, at the current domestic natural gas price of $1.25/MMBtu and a carbon price of about $65 per tonne. Expediting exports Assuming a green hydrogen production cost of $1.48/kg by 2030, the delivered cost of hydrogen from Saudi Arabia’s western region to the Port of Rotterdam via the Suez Canal can be quite competitive. To estimate it, the researchers also make assumptions about conversion to carrier, shipping and dehydrogenation costs. They think liquid hydrogen can arrive at Rotterdam in 2030 with a delivery cost averaging between about $3.50/kg and $4.50/kg. This compares favorably to the expected cost of green hydrogen production in Europe, which according to recent research will be between $3/kg and $5/kg in 2030. While it appears that Saudi hydrogen exports to Europe can be competitively priced, much will depend on the type of carrier used. Methods for the sea transport of liquid hydrogen, or in the form of a liquid organic hydrogen carrier (LOHC), are still in development. Ammonia is a proven carrier of hydrogen energy, but it requires cracking the ammonia back to hydrogen (dehydrogenation) if pure hydrogen is needed. This adds an additional cost ranging from $1/kg to $2/kg according to recent research. To avoid this potential cost, the KAPSARC researchers suggest that Saudi producers look for opportunities to trade ammonia for direct use, whether blue or green. Markets may be found by substituting for gray ammonia in the production of fertilizers. New applications, such as blue ammonia for power generation in Japan, may also open opportunities for export. They also advocate for de-carbonizing domestic industries, such as ammonia and methanol plants, by switching them to low-cost blue or green hydrogen. This conversion could extend to other domestic industries, such as steel, cement and aluminum. The researchers also see potential in the transport sector, with new fuel cell applications and sustainable jet fuel. This strategy could lower the country’s carbon footprint while also opening new opportunities for the production of carbon-neutral products for export. Low-carbon hydrogen would lower the carbon content of many industries’ finished products, thereby better positioning them for international markets as carbon policies become more stringent worldwide. Regions green and blue Saudi Arabia’s vast territory suggests that regional specialization for hydrogen production is feasible. The KAPSARC report sees two general regions where