BY CONTINUING TO USE THIS SITE, YOU ARE AGREEING TO OUR USE OF COOKIES. REVIEW OUR
COOKIE NOTICE

Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.


  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

If you are a Platts Market Center subscriber, to reset your password go to the Platts Market Center to reset your password.

In this list
Natural Gas

EU natural gas demand to stay at current levels despite likely boost from power: IEA

Agriculture | Grains | Energy | Thermal Coal | LNG | Natural Gas | Oil | Crude Oil | LPG | Refined Products | Petrochemicals | Shipping | Tankers

Market Movers Asia, Jun 24-28: Trump, Xi to meet at G20 summit; US to announce additional sanctions on Iran

Natural Gas

Platts Inside FERC Bidweek Watch

Commodities | LNG | Natural Gas | Marine Fuels | Tankers | Banking

18th Annual LNG Conference

Electric Power | LNG | Natural Gas

López Obrador se compromete a solucionar los problemas de electricidad y gas en la península de Yucatán

EU natural gas demand to stay at current levels despite likely boost from power: IEA

Highlights


Coal, nuclear retirements to help gas in medium term

EU 'well placed' to compensate for falling domestic output

Gazprom to accommodate some US LNG to keep prices sustainable

London — EU natural gas demand is unlikely to rise from current levels in the coming years despite an expected boost in consumption from the power sector, the International Energy Agency said in its latest World Energy Outlook published Tuesday.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

At the same time, the EU is set to become increasingly import-dependent as domestic production slides by as much as 50% from current levels.

"The power sector remains central to the long-term prospects of gas in the EU," the IEA said, adding that the estimated 7% increase in EU consumption last year to more than 460 Bcm was driven by power generation.

The IEA said that with many coal plants in the EU being retired in the coming decade and a more downbeat outlook for nuclear power, gas stands to benefit alongside renewables.



"As a result, gas use in the power sector expands slightly in the period to 2040, and over 110 GW of new gas-fired power plants are built to replace retirements and to provide flexibility for an increasing share of variable renewables," it said.


IMPORT DEPENDENCE GROWS


With only flat demand overall in the EU, the expected precipitous fall in EU gas production will see the bloc becoming increasingly import-dependent.

However, the IEA believes the EU can fill the import gap fairly easily.

"The EU is well placed to substitute falling domestic output with imports -- it has a well-functioning and efficient internal gas market, many under-utilized regasification terminals, and a wide portfolio of pipeline import routes," it said.

The agency's projections see EU gas imports increase by some 60 Bcm to reach around 390 Bcm in 2040, with Russia remaining the largest supplier of gas to the EU, maintaining its market share of around 40%.

It said Gazprom will retain a strong competitive position in the European market, with existing long-term contracts of up to 100 Bcm in 2025 (at 70% take-or-pay level), low production costs and more than 150 Bcm of spare gas production capacity.

It also sees production in Norway staying at high levels over the next few years, helped by expansions on the giant Troll field in the North Sea and by the start of the new Aasta Hansteen field in 2018.

But, it said, Norway faces the prospect of declining export availability over the longer term -- after 2020 production is expected gradually to decline from just above 120 Bcm to 100 Bcm toward 2040.


US LNG VS RUSSIAN GAS


As Norwegian shipments drop, a range of other suppliers expands into the European market, the agency said.

"Chief among them are US LNG suppliers, who reach a market share of just over 10% in 2025 and then keep this share in the longer term," it said.

The emergence of the US as a major LNG exporter with the "ability and ambition" to export to Europe could lead Gazprom to react.

The question the IEA poses itself is: will Gazprom choose to engage in a price war to keep US LNG exports to Europe at bay?

"It is reasonable to assume that Gazprom can comfortably supply gas at the level that matches US imports and even undercuts them," it said.

"If Gazprom chooses to lower its price, however, it gains market share but reduces the value of its gas sales -- a strategy that can only be profitable up to a certain point," it said.

Instead, the IEA believes the two sources will learn to co-exist.

"The New Policies Scenario is based on the assumption that Gazprom will accommodate some US LNG in the growing European import market in order to keep prices at a sustainable level," it said.

It rejected the idea of a price war, suggesting this would be counterproductive for both Russia and US LNG suppliers.

"A price war that brings European gas prices down to the variable costs of US LNG exports is not in the interest of either Gazprom or US exporters," it said.

"Nor is such a strategy commercially sustainable in the long term: neither Russian nor US companies are likely to bring new supplies on stream if they cannot recoup the full cost of their existing assets. If a price war were to unfold in Europe, it would also be a sign of collective failure of the LNG industry to unlock new demand in more profitable markets," it said.

"Cut-throat competition in Europe is thus likely to be a last resort."

--Stuart Elliott, stuart.elliott@spglobal.com
--Edited by Alisdair Bowles, alisdair.bowles@spglobal.com