Pipes and Pipe Dreams
In a session entitled “Investment in Gas and the Evolution of the European Gas Market,” one speaker at the European Autumn Gas Conference in Paris, France was forthright in offering his opinion.
Steve Rose, Head of Gas Market Design at RWE Supply & Trading, spoke of the development of the single European energy market. He said, “We hear a lot of talk from regulators, but what is this vision? Is it reality or a pipe dream?”
It was a pipedream, he said, with insurmountable difficulties like pipeline congestion, single balancing operators, and political and national interests.
“If so,” he asked, “what are we really talking about? Each member state must implement its own entry/exit system with a virtual trading point.”
Wim Groenendijk from the European Network of Transmission System Operators for Gas (ENTSOG) also weighed in.
“Investment in infrastructure is needed to connect sources of supply with demand,” he said. “Indigenous production is reducing, and new sources are coming in, like LNG. A lot of investment in gas infrastructure will need to take place to accommodate these kinds of investments.”
He outlined the goals of the European Community: a single European gas market, security of supply, sustainability, the climate goals and the nuclear phase out.
Mr. Groenendijk said: “Taking into account all these goals it adds up that we believe a market based approach needs to be pursued. Construction and operation of such infrastructure by TSOs must be sustainable from long-term financial and regulatory perspectives.
“We strongly identify with these market based principles,” he added. “We are there to serve the market as an enabler.”
Gottfried Steiner, CEO at Central European Gas Hub Ag, spoke of Austria’s gas hub at Baumgarten, which he said was at the crossroads of current and future pipeline systems.
He said it was a growing prosperous industry, evolving at different speeds, and that price signals were crucial for investment.
“OMV is determined to invest even more in Baumgarten,” he noted, explaining that Baumgarten had been the most attractive platform for market based balancing.
Mr. Steiner continued, “European gas markets will remain fragmented at least in the mid term. National differences will remain, and there is pressure on market consolidation.”
Didier Favreau, Senior Economist at CEDIGAZ, the international association for natural gas, showed a slide representing the forecast of the market evolution, and forecast of demand in Europe. He said Europe must be considered a geographical region, because it included Norway and Turkey.
“We forecast a strong growth of about 4.7% a year of natural gas imports,” explained Favreau. “Between 2010 and 2020 we forecast a loss of about 80 BCM of European production.”
With a growth of the demand of 80 BCM, which he said could be from the power generation sector, the deficit of gas supply could increase by 160 BCM. “At the minimum the required increase will be about 100 BCM,” he concluded.
“We have also a positive view of LNG. We believe that increases in LNG supply could be as high as 60 BCM or more. One of the main reasons is the increased availability of LNG and also the diversity of supply that this source of supply will offer.”
He showed a chart of diversity of supply, and showed how LNG helped out with that.
Finally, Favreau noted that the further east one went in Europe, the less diversity of supply there was.