European Gas Price, Volatility & Security of Supply

Transcription

1 European Gas Price, Volatility & Security of Supply Dr. Ashna Rahman Head of Analytics & Consulting (EMEA) September, Platts, McGraw Hill Financial. All rights reserved.

2 Key Points European gas demand has been in decline since 21 but it has been picking up in 213. In recent years the biggest decline has been in gas to power sector. Total European production is in decline. Since 21 European reliance on imported volume has been in sharp rise despite demand destruction. LNG remains the swing factor in the supply mix. Recent months have seen huge price hike and volatility in the European prices. 2

3 Demand & Production Total Demand vs Domestic Production

4 Average Daily Volume (MCM/day) Average Daily Volume (MCM/day) Demand & Production Between 21 & 212 total European domestic demand has declined by approximately 12%. During the same period domestic production declined by 15%. The gap between supply and domestic production is met by foreign or imported gas ,4 1,2 1, Total European Domestic Production Total European Domestic Demand Source: Bentek 4

5 Supply Imported Gas

6 Daily Average Net Volume (MCM/day) Total European Import of Piped Gas 3 Total EU Piped EU Piped Imports and LNG Sendout % 16% North African 2 Norwegian 15 Russian 1 26% 33% LNG EU Piped Imports and LNG Sendout 213 Russian and Norwegian volumes to Europe has seen an increase (4% higher). So far this year Russia and Norway supplied almost 75% of all foreign gas. 36% 14% 12% 38% North African Norwegian Russian LNG Source: Bentek 6

7 Going ahead Forecast

8 MCM/d Demand Forecast 1,2 Total Gas Demand , France Germany Italy Netherlands Spain United Kingdom Production Assuming average European GDP growth at 2% in 218, the total demand should reach around 1 bcm/d similar to 21 level. Domestic production on the other hand will decline by 18% from 21 level. This will mean even bigger (6% higher) reliance on foreign gas. Source: Bentek 8

9 Price Volatility & Securing Supply Recent trends

10 Spread $ bbl Euros/MWh Price & Volatility Average NBP Day Ahead Price (p/th) UK NBP Day-Ahead Price Volatility Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec NBP Front Month Contracts September gas p/th October gas p/th November gas p/th Brent crude $/bbl Source: Bentek 1

11 Volatility & Securing Supply- Infrastructure working harder mcm/d p/th Infrastructure providing huge security of supply by increased capacity utilisation during times of high demand. Interconnector reached 98% of capacity at 7 million cu m on March 2 and delivered a record 1.6 billion cu m to the UK over the month. Total reversal of market dynamics from the winter of UK continental imports, LNG sendout & NBP - Zee Spread LNG Sendouot BBL IUK NBP - ZEE Spread Price Parity 11

12 mcm/d Volatility & Securing Supply- Infrastructure more price reactive mcm/d /MWh mcm/d p/th /MWh IUK flows, UK LNG sendout and NBP - Zee Spread IUK LNG Sendouot NBP - ZEE Spread 6 Net Dutch-German flows & NCG-TTF spread.7 14 TAG and Transitgas flows with PSV Day-ahead price Net High Cal NCG - TTF Spread TAG Transitgas (TENP) PSV - TTF Spread 12

13 Storage Inj/With (MCM/day) Volatility & Securing Supply- Infrastructure more price reactive 1-Aug 3-Aug 5-Aug 7-Aug 9-Aug 11-Aug 13-Aug 15-Aug 17-Aug 19-Aug 21-Aug 23-Aug 25-Aug 27-Aug 29-Aug Day-ahead Price (Euros/MWh) mcm/d Storage Inj/With (MCM/day) 1-Aug 3-Aug 5-Aug 7-Aug 9-Aug 11-Aug 13-Aug 15-Aug 17-Aug 19-Aug 21-Aug 23-Aug 25-Aug 27-Aug 29-Aug Day-ahead Price (Euros/MWh) 2. UK Daily Midrange INJ/WITH UK Daily Midrange INJ/WITH Jul 8-Jul 15-Jul 22-Jul 29-Jul 5-Aug 12-Aug 19-Aug 26-Aug (1.) (2.) (3.) (4.) 46. Inj/with NBP Day Ahead Inj / Wth NBP Day Ahead Italian Storage Inj/With 212 Italian Storage Inj/With Italy Storage inj/with Daily - Aug 212 PSV DA - AUG Italy Storage inj with Daily - Aug 213 PSV DA - AUG 213

14 Volatility & Securing Supply LNG remains elusive & became more price sensitive million cu m million cu m $/MMBtu $/MMBtu European LNG Imports Strong Asian prices and demand made Europe a less attractive destination for LNG. 7, 6, 5, 4, 3, 2, In March 213, total LNG sendout in Europe fell to just 86 million cu m/day compared to 17 million cu m/day in January. 1, Spain United Kingdom France Turkey Italy Other NBP 2.. Year-on-year trends shows 33% fall in European LNG sendout in the winter of in comparison to the significantly milder winter of Going ahead Europe needs to maintain strong price level in order to compete in global LNG market for its share of cargo European LNG Re-Exports Belgium France Portugal Spain NBP MA JKM 14

15 Conclusion Fundamental shifts in European gas market dynamics. Price levels are adjusted higher in order to secure supply. Infrastructure (pipeline, storages) providing more crucial through greater capacity utilisation than ever before and has become more price sensitive. Price volatility is back in the game. 15