Bloomberg: Dong Invests in Production as Oil Links Keep Gas Uncompetitive

Dong Energy A/S, Denmark’s biggest utility, is investing in natural-gas production and shunning opportunities to build gas-fired power plants as European prices for the fuel stay high because of contracts linked to crude oil.

“The current prices of oil-linked contracts represent a challenge for the competitiveness of gas,” Henrik Valgma, head of portfolio management and trading at Dong, said in a June 14 interview in Copenhagen. “Gas is too expensive and combined- cycle gas turbines aren’t paying off. Something has to change.”  

Dong plans to double production of oil and gas in the five years to 2016 to reduce the cost of fuels it trades and uses to power generators in Denmark, Valgma said. Gas supplied through contracts linked to oil has become expensive as Brent crude closed above $100 a barrel for all but one day from March 2011 through May of this year.  MORE