Analysts predict that a Republican victory in the upcoming U.S. presidential elections could mean a halt to American export policy. This would be an energy super shock for global supply.
The end of each year naturally brings reflection on what has been accomplished while simultaneously looking to the future. The world of energy and energy markets have experienced significant upheavals in recent years, resulting in historic price fluctuations. At PPD, despite significant challenges and turbulence, we have managed to achieve satisfactory results thanks to strategic planning, but even more so due to rapid adaptation to new conditions.
So what does the year ahead hold for us? The changes we have witnessed give us reason to speak of 2024 as a major turning point for the European energy sector. Entering the first real winter without Russian gas, we are faced with a series of challenges, but also opportunities that will shape the future of our energy landscape. Four factors will shape our energy environment, and thus PPD’s business strategy in the near future: continued pronounced price volatility, changing circumstances that require faster business and regulatory adaptation, a focus on foreign growth, and the geopolitical situation.
From the end to the beginning of the chain
To describe the current energy situation in Europe, we often hear the phrase ‘the worst is behind us.’ Economic recovery projections are somewhat better than initial expectations, and we are entering the first real winter without Russian gas calmly. However, the pronounced price volatility we have witnessed in the previous period will remain a key risk and the backbone of the energy landscape in Europe. Small changes in market balance have a huge impact on prices due to the current conditions of inelastic supply and demand. In simple terms, prices react more to geopolitical events than to supply and demand. We have been exposed to volatility for some time. We have witnessed record low prices due to the pandemic, up to record high prices due to fears of losing Russian gas supply, which accounted for 40 percent of Europe’s supply. Many energy companies could not withstand the liquidity pressure or misjudged trends in the markets, and the market reacted mercilessly. In 2023, prices fell, but not to the levels they were at the previous year, and they remain volatile.
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When the idea of an LNG terminal in Omišalj was first considered, few believed we would today be discussing Croatia’s positioning as a gas hub. The LNG terminal is our connection to the world, allowing us to choose sources and guaranteeing great security. Until now, we were the last link in the gas supply chain via pipelines, and now, with the help of the LNG terminal, we have positioned ourselves at the beginning of that chain, which is, of course, always more cost-effective. Now, with the LNG terminal and increased interest from countries in the hinterland for gas supply through Croatia, as well as the announcement from the Ministry that the IAP (Ionian Adriatic Pipeline) project will be developed, Croatia is truly becoming a gas hub. Our country now sits more equally at the table with other major players in the energy market. What does this teach us? That we need to be more ambitious, but also adapt to new circumstances much faster than before. Now, with the LNG terminal, it is the right moment to launch a domestic gas exchange, and Croatia’s interest should be to guarantee secure supply for its consumers under the best possible market conditions.
