Despite gas-market deregulation, Europe remains “a patchwork of markets, each retaining its own gas-use specificities,” a Cedigaz official told Institut Français du Pétrole’s annual Panorama conference in Paris.
The opening of gas markets in the European Union has encouraged mergers and acquisitions as companies deal with growing competition, noted Cedigaz Sec. Gen. Marie-François Chabrelie.
Operators have increased in size, expanded beyond national borders, become competitors in multiple energy markets, and been fully or partly privatized. Restructuring will continue this year, encouraged by high energy prices and the need for gas and electric utilities to compensate for the loss of customers in traditional markets. But the “vast and single European gas market” targeted by the EU has not yet developed, Chabrelie said.
Demand trends
Gas use by EU members varies according to access to supply.
In 2004, five countries-the UK, Germany, Italy, the Netherlands, and France-accounted for 70% of the 526 billion cu m consumed in the EU.
In northern and central Europe the potential growth of gas is perhaps 1.5-1.9%/year, particularly in northern Europe where the market is mature.
In central Europe, where coal still dominates, additional gas volumes should be more limited.
But privatization and investments in national utilities by large gas and electricity groups of western Europe should boost gas demand. Prices will be decisive.
In southern Europe, Chabrelie said, electricity is by far the main driver of gas demand growth of about 2.8%/year.
In Spain alone, 19 combined-cycle power plants have generation capacity of 8 Gw, while 70 facilities accounting for 51 Gw of capacity are either coming on stream or planned.
By 2008, Italy will also have added to its existing base 10 Gw of combined-cycle capacity.
Overall, Chabrelie said, gas use in Europe could well grow overall by 2.2%/year during the next 15 years, bringing gas demand to some 730 billion cu m/year by 2020.
European supply
Europe is 40% dependent on non-European gas supplies, receiving 240 billion cu m/year from Russia, Algeria, Libya, Nigeria, and the Middle East.
With 89% of European gas reserves concentrated in only three countries-the UK, Norway, and the Netherlands-Europe’s gas dependence will grow to 65% by 2020. LNG will account for much of the growth.
LNG will provide flexibility needed to rebalance the EU’s internal market. By 2020 LNG might account for 15-18% of total EU gas supplies.
There are enough projects, Chabrelie said, to treble the EU’s LNG receiving capacity over the next 15 years. Extensions and new projects should hoist existing capacity of 62 billion cu m/year to about 100 billion cu m/year by the decade’s end.
As the EU’s gas market continues to open, transborder gas flows will multiply. Besides new gas pipelines, which by 2012-13 should provide around 100 billion cu m/year of additional capacity, and the growing role of hubs, LNG will help rebalance national markets within the EU.
However, high gas prices in the US might become benchmarks and determine LNG destinations. Durably high gas prices in the US might deprive Europe of the LNG needed to bring fluidity to its market, Chabrelie said. ✦