European Natural Gas War Heats Up As Prices Rise

Business

Authored Liubov Georges via OilPrice.com,

Europe’s liquefied natural gas imports have surged sixteen percent (from 40.9 bcm in 2016 to 47.4 bcm in 2017) to become the third largest source of gas supply after Russia and Norway. The re-emergence of Europe as a major LNG market came after years of coal and nuclear power plant retirements as well as steep declines in Europe.

In global gas markets, Europe looks like a bright star in terms of commercial opportunities over the next few years, as growing demand coincides with rising prices and strong imports. The United States, with four new LNG projects under construction, is in excellent position to seize the opportunity as a supplier in this dynamic market and assert the strategic role as it challenges Russia’s dominance as the region’s top gas supplier.

Europe’s energy market is undergoing structural changes that allowed natural gas to gain a larger share in the total energy mix over the last two years. After almost a decade of lackluster demand, market expectations for gas were tempered. Yet, contrary to this bearish outlook, gas consumption across the EU grew by 52 bcm (11%) between 2014 and 2016 and was called “one of the biggest surprises” by Venture Global LNG, Inc.

The driving factor behind the recovery was the coal- to- gas move in the power sector that reduced Europe’s coal fired capacity to 156.6 GW in 2017 compared to 190 GW in 2010. National public policies and market forced the retirement of most remaining coal plants by 2030. As Europe’s need for gas increased, production from the North Sea and Groningen field in the Netherlands has been steadily declining. Groningen’s output, in particular, was slashed from 45 bcm in 2015 to 12 bcm in 2017. Dutch regulators expect to completely shut down Groningen production by 2030. This in turn will create a significant supply gap within the European gas market.

As Europe’s gas demand grew in 2017 it turned first and foremost to Russia. Despite concerns over Russian dominance over supply, its export of “blue fuel” to Europe has grown to reach a record high 193.9 Bcf in 2017 – eight percent higher than its previous record set in 2016. It is commonly said that Russia is flooding Europe with large volumes of gas to undercut prices and keep LNG at bay. In reality there is no evidence of any price war. So far this year, prices at …read more

Source:: Zerohedge.com

      

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