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LNG, pipeline capacity to boost Southern Europe’s competitiveness

Oil&Gas Materials 9 December 2022 14:42 (UTC +04:00)
LNG, pipeline capacity to boost Southern Europe’s competitiveness
Laman Zeynalova
Laman Zeynalova
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BAKU, Azerbaijan, Dec.9. The increase in European industry’s already high cost base will be a net loss for the continent, Trend reports Dec.9 with reference to the Economist Intelligence Unit (EIU).

“Within the industrial sector, the impact will be most keenly felt in chemicals and fertilizers, sectors in which natural gas is a direct input to the final product, whereas sectors such as automotive, which use gas for energy, but with possible alternative power sources, will see significant substitution and, as a consequence, less lasting scarring. The gas crunch also creates opportunities for firms that can provide effective substitutes for gas in industrial processes, which may also drive innovation in the energy and materials spaces. Pressure on heavy industries is likely to see the less energy-intensive service sector hold up better through the recession and be more likely to drive future growth,” reads the EIU report.

The report reveals that globally, China is well positioned to benefit, with pre-existing cost base and scale advantages in metals, chemicals, and solar and wind installations.

“Regionally, southern Europe will see its competitiveness within Europe increase, as it has more installed LNG and pipeline capacity, at the expense of central and eastern Europe. Southern Europe also benefits from milder winter climates and greater reliance on services to begin with. Firms active in the green transition stand to benefit, as subsidies and new forms of energy generation will raise profitability in the medium to long term. One issue to watch out for is the introduction of the EU Carbon Border adjustment mechanism in 2026. This may present a competitive advantage for chemicals producers in Europe, which already score well on green metrics, and will be an important consideration for European firms currently expanding production in non-EU markets but planning on importing to the EU.”

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