Large European energy companies are preparing for lingering high gas prices, curbing hopes for significant further declines after mild weather and strong inventories helped get Europe through the winter.
On Thursday, Bord Gáis Energy (BGE) said its retail energy supply business made a loss in 2022 as price volatility hit the sector, but its British parent Centrica posted record multibillion profits.
BGE said the Irish business absorbed more than €60 million in losses and made significant investments in customer protections during the period. The loss also included the impact of higher bad debt, lower customer consumption from warmer weather and a change in customer behaviour.
Centrica meanwhile, which also owns British Gas, said adjusted operating profit for 2022 rose to £3.3 billion from £948 million in the previous year.
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Natural gas prices in Europe have plunged about 80 per cent since last summer’s peaks but remain higher than historic averages. Shell said it expects volatility to remain in the short term and Repsol cautioned that high prices may be structural due to production obstacles.
“Whilst customers may see some relief given recent easing of prices, it remains clear that some will continue to need help, said Centrica chief executive officer Chris O’Shea.
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Bord Gáis said it grew retail customers by 17,000 over the course of last year after the exit of some suppliers in the market.
Overall, adjusted operating profit for Bord Gáis Energy increased by 11 per cent to £31 million (€34.9 million), on good wholesale trading performance and strong availability from the reopened Whitegate CCGT. Compared to 2020, the last full year that Whitegate was at full capacity, profit was lower.
Revenue for the year was £1.77 billion, up from £1.1 billion in 2021. Bord Gáis said it would donate 10 per cent of adjusted operating profit to its energy support fund for vulnerable customers during the crisis. That is being administered with the help of Focus Ireland, St Vincent de Paul, Mabs and Alone.
Lower gas prices in recent months have given end users and policymakers a breather, allowing supply concerns and historic inflation rates to ease. A mostly mild winter put a lid on the use of gas for heating, while strong liquefied natural gas flows have helped buyers to replace Russian supplies.
But company earnings reports this week highlight that the same conditions seen in 2022 might not repeat this year. Europe still faces the prospect of gas shortages this year unless it further curbs demand, the International Energy Agency (IEA) warned in a report on Wednesday.
Gas markets are in “better shape than many expected one year ago,” said IEA executive director Fatih Birol. “But the reality is that winter 2023-2024 is likely to be the real test.”
Forecasters see northwest Europe ending this month with colder weather, as temperatures are expected to drop by late next week. While that could lead to heavier withdrawals of gas supplies, market participants are showing little concern over a squeeze for the remainder of this winter. Benchmark contracts fell as much as 3.5 per cent on Thursday.
Further ahead, Shell said in its LNG Outlook that gas demand in Europe will increasingly exceed supply until 2030.
“Europe’s increased need for LNG looks set to intensify competition with Asia for limited new supply available over the next two years and may dominate LNG trade over the longer term, Shell, a major trader of the fuel, said.
Dutch front-month gas futures, Europe’s benchmark, were trading 3.2 per cent lower at €53 per megawatt-hour by 10:56am on Amsterdam.ply. — Additional reporting: Bloomberg
