WESTERN EUROPE CORE GAS MARKET SUPPLY SHORTFALL SEEN

Western Europe's core natural gas market will need one or more major new supply sources early next century. But European Commission efforts to restructure the gas business may stand in the way. Dries Ausems, manager of business research at Energie Beheer Nederland, Netherlands, foresees a shortfall in the core market of 10 billion cu m/year in 2000, widening to 40 billion cu m/year in 2010.

Feb. 25, 1991

3 min read

Western Europe's core natural gas market will need one or more major new supply sources early next century.

But European Commission efforts to restructure the gas business may stand in the way.

Dries Ausems, manager of business research at Energie Beheer Nederland, Netherlands, foresees a shortfall in the core market of 10 billion cu m/year in 2000, widening to 40 billion cu m/year in 2010.

Ausems told a Cambridge Energy Research Associates conference in Houston this month that the gap might be filled by some combination of gas from arctic reserves, Nigerian LNG, or LNG or pipeline deliveries from the Middle East.

"But it's certain it will be long distance gas, which will require huge incremental investments either in pipelines or in LNG terminals," he said.

Ausems focused on the market represented by Italy, Germany, France, Belgium, and Netherlands, which are connected by an extensive gas grid and have a well developed infrastructure.

Total group demand will increase to nearly 290 billion cu m/year in 2010 from about 206 billion cu m/year in 1990. Demand will increase significantly in each country except Netherlands.

Last year, 40 billion cu m of the group's gas came from production in France, Italy, and Germany, 72 billion cu m from Netherlands-including 42 billion cu m for domestic use and 30 billion cu m exported to other members, 22 billion cu m from Norway, 46 billion cu m from the U.S.S.R., and 26 billion cu m from Algeria.

Gas available under firm international contracts will diminish rapidly after 2000. Ausems expects some of the shortfall to be made up from a 150% increase in Norwegian deliveries, a doubling of Algerian production, and some increase from Netherlands.

Ausems doubts the Soviet Union will be able to maintain its current delivery level to the West. Any increase from current production would be absorbed by central Europe, he said.

NEW SUPPLY SOURCES

Demand not met from those increases represents potential for new, long haul supply sources.

Ausems thinks "about a dozen multibillion dollar projects" will be needed to meet the expected demand. And that will require "assurances of large take or pay contracts," involving large, financially strong buyers able to rely on a firm outlet for the gas.

EC, however, proposes to strip large pipeline companies of their merchant functions and to reduce their control over gas grids.

"These proposals pose a serious threat to the development of the European gas supply," Ausems said.