Leaders of Europe’s gas industry gathered Nov. 13 in Vienna at the 27th annual European Autumn Gas Conference to hear what most already know: Expensive, oil-indexed-priced natural gas in Europe is struggling to compete with plentiful coal and subsidized renewables.
Anne-Sophie Cobeau, senior gas expert at the International Energy Agency, Paris, reported that Europe in 2011 was alone among the world’s gas-market regions in seeing a decline in natural gas demand. She said that in fact it was lower than in 2009, the year following the start of the global financial crisis.
That drop in 2011 was due not only to milder winter weather but also to high commodity prices and lower regional gross domestic product. Removing weather from the equation, she called the last 10 years in European gas demand a “lost decade.”
And 2012 is looking no better: Natural gas demand for the first 7 months of 2012 fell by 3%. Since 2011, she said, high-priced gas can no longer compete with coal, especially increased cheap supplies from the US. Those supplies in turn are being driven out by record-low US gas prices.
This view was echoed by Massimo De Odoardo, a principal natural gas analyst covering Europe for Wood Mackenzie. He told the conference that the connection between natural gas demand and regional GDP has been weakening for the last 10 years.
Thierry Grauwels, gas and LNG market development manager for Shell Upstream International, added that Europe is moving backwards in gas development and use. He implicated regulators when he said, “There is no level playing field for natural gas,” citing high European taxes on both gas and diesel.
In the UK, Grauwels cited specifically, gas demand into power generation is “as low as ever. Yet prices are increasing.”
Growth appears possible, however, in transportation, citing Shell’s investment in that segment.
Contact Warren R. True at email@example.com.