By Nora Buli OSLO, March 5 (Reuters) - A prolonged Iran crisis that has choked off key energy shipments and halted Qatari LNG output is set to push European power prices higher and weaken industrial
Iran Crisis May Raise European Power Prices and Threaten Industry, Statkraft CEO Says
Impact of the Iran Crisis on European Energy and Industry
By Nora Buli
Overview of the Crisis
OSLO, March 5 (Reuters) - A prolonged Iran crisis that has choked off key energy shipments and halted Qatari LNG output is set to push European power prices higher and weaken industrial competitiveness, the CEO of Norwegian utility Statkraft said on Thursday.
Attacks by the United States and Israel on Iran and Tehran's strikes on Gulf Arab neighbours have paralysed shipping through the Strait of Hormuz.
The crisis has forced the shutdown of liquefied natural gas (LNG) production in Qatar, which accounts for 20% of global supply of the super-chilled fuel.
Statkraft CEO's Perspective
While foremost a humanitarian crisis and a geopolitical situation, the conflict has wider ramifications, said Birgitte Ringstad Vartdal, Statkraft CEO said while presenting fourth-quarter earnings.
Potential for Higher Power Prices
"What is happening now can lead to a period of higher prices in Europe," Vartdal said, highlighting that gas-fired plants often set the price of power.
Statkraft is Europe's biggest renewable energy producer, and owns four gas-fired plants in Germany.
Exposure of European Power Markets
The German, French and British power markets are especially exposed to the risk from a 50% spike in gas prices since the start of the conflict on February 28, she added.
Europe's benchmark German front-year power price has jumped around 9% over the same period.
Industrial and Market Implications
Challenges for Industrial Activity
Persisting higher prices would pose a challenge for industrial activity, Vartdal cautioned.
Gas Storage and Hydropower Concerns
Gas Storage Situation
"We are also in a period where gas storage in Europe is low, but at the same time we are thankfully over the worst of the winter, so we are not worried about the physical situation in the coming months," Vartdal said.
Hydrological Balance in Norway
A combination of a weak hydrological balance in southern Norway, stemming from a lack of snow that could eventually feed hydropower production, and any longer-term impact gas market tightness could also impact prices in Norway, she added.
(Reporting by Nora Buli; Editing by Bernadette Baum)
