Uncertainty over European energy sources and the outlook for Europe’s energy supplies is complicating BASF’s budget planning for 2023, the German chemical company’s Chief Financial Officer, Hans Ulrich Engel said.

BASF is considering at least one more scenario in addition to the traditionally developed, optimistic and pessimistic scenarios, Engel told The Wall Street Journal.

Who supplies natural gas to Europe? 

The company uses natural gas to generate electricity for its plants, and its energy costs have increased several times over as gas prices have skyrocketed. In the second quarter of 2022, they were 800 million euros higher than in the same period of the previous year, totaling 1.1 billion euros.

“Now we have days in Europe when gas prices go up and down by 50 euros per megawatt hour. We see huge fluctuations in short periods of time,” Engel notes.

The day-ahead, TTF spot gas price in the Netherlands on Oct. 7 is 119 euros per MWh, down substantially from levels at the end of August when it was 300 euros per MWh, the WSJ said.

Forecasting tools based on artificial intelligence have become more important in the current operating environment, said Engel, who is also BASF’s director of digital technology. The company has begun updating forecasts more often, as well as analyzing daily sales and orders to estimate future energy needs, he said.

BASF is also working on replacing gas with other energies and ramping up power generation with alternative sources, but so far the effect of these measures is negligible. The company expects to be able to substitute only about 7 to 8 percent of its gas consumption, Engel said. According to him, BASF is preparing for possible gas shortages but is confident that it will be able to maintain its main plant in Ludwigshafen even if Germany is forced to ration its electricity consumption.

Earlier, we reported that private investors are selling off shares at the fastest pace since 2020.