Gas Supply Security in Europe in the long term:some key issues Frits van Oostvoorn Energy research Centre of the Netherlands, ECN 24 th NA Conference of USAEE/IAEE Washington, 10 July 2004
Topics of presentation Gas Supply Security of EU-30 in long run Gas demand and supply in EU-30 till 2030 Import dependency and its risks Key concerns for EU regarding SoS Proposed actions for mitigating SoS risks Conclusions
Drivers for Natural gas demand in Europe Greenhouse gas and other pollutants reduction policies Higher efficiency in power & heat generation by CHP, CCGT etc Lower capital costs and shorter building times lower investment risks etc Question : Will supply be able to meet demand with acceptable SoS risks levels?
Assumed EU fossil fuel prices source: IEA contribution US$(2000) per toe 500 450 400 350 300 250 200 150 100 50 Crude oil Steam coal Natural gas 0 1970 1980 1990 2000 2010 2020 2030
Primary Energy Demand EU-30 Reference Scenario Source: IEA Study for Engaged 900 800 700 Oil 600 [Mtoe] 500 400 300 Gas Coal 200 100 Nuclear Non-hydro renewables Hydro Other 0 1970 1980 1990 2000 2010 2020 2030
Changes in Primary energy demand Reference scenario IEA for Engaged 400 Mtoe 300 200 100 0-100 Coal Oil Gas Nuclear Hydro Other Renewables Other Primary -200 1971-2000 2000-2030
Gas demand key CEE countries source: EU-30 study [BCM] 40 35 30 25 20 15 10 5 0 BG CZ HU PL RO SL 2000 2010 2030
Gas Supply in EU-30 Bcm 1000 900 800 700 600 500 400 300 200 100 0 1970 1980 1990 2000 2010 2020 2030 Indigenous production Net imports
Natural gas demand and imports EU-30 region source: IEA sub-study for Engaged 1200 1000 [Bcm] 800 600 400 2001 Reference - 2030 High gas imports - 2030 Low gas imports - 2030 200 0 Demand Production Net imports
Supply costs estimates new supplies to EU borders 2010/15 LNG Pipeline Russia (Barents Sea) Russia (Yamal) 3.1 1.8 1.7 1.0 Russia (Nadym-Pur- Taz) Venezuela 2.2 Trinidad & Tobago 2.3 2.4 1.8 1.0 Algeria Nigeria (GME expansion) Algeria (Medgaz) 1.5 Libya 2.0 Egypt 1.7 2.3 1.6 1.1 Russia (Caspian) 1.5 1.5 Iraq Qatar (via Suez Canal) Kazakhstan (via Russia) Turkmenistan (via Iran) Azerbaijan (via Georgia) 1.6 Iran
Net gas imports EU-30 per region of origin source: IEA contribution 700 600 Bcm 500 400 300 200 100 Non-specified Other FSU Russia Middle East Africa Latin America 0 2001 2010 2020 2030
Gas import dependence in CEE s per scenario from 2000 to 2030 source: Engaged study % 100 90 80 70 60 50 40 30 20 10 0 CR PL RO SK 2000 Ref Low High
Investments needs for gas-supply infrastructure to 2030 Investments of around $ 500 billion needed in EU Investments of $ 190 billion for outside EU Long lead times, high risks investments Investments in LNG, pipelines, storage, new and existing transit capacity and connections e.g.: - Russia/Baltic/North Sea pipeline - Russia/Ukraine/Belarus pipeline - Austria/Iran Nabuco pipeline - Connections in CEEC s - LNG facilities, Spain, Italy, France, UK
Key questions concerning SoS in Europe How to manage the increasing reliance in EU-30 on gas supplies from remote areas EU-30 import share rises to 60-80 % in 2020/30. Many countries even 100% How to close the demand-supply gap and create more flexibility in supply, routes and suppliers, to EU markets How to reduce the uncertainties for investors on the: - Transition to competitive more liquid downstream gas markets - Changes in type of financing and contracting of gas projects - Regulatory changes and differences in the EU-30 - Gas bubble in short term vs supply gap in long term - Volatile gas demand prospects, gas and oil prices
EU policies in reducing energy SoS and investment risks EU Green paper 2000: Opening up discussions Communication 2002 on Security of EU Gas Supply Amended gas Directive adopted June 03 with: - Full market opening July 2007 - Legal unbundling transmission July 04 and 07 - Network access regulated prices - Obligation MS to monitor SoS - Minimum output quality standards - Stimulate investment in storage capacity - Flexibility in long term contracts - Solidarity mechanism and cooperation in enlarged EU-30 TEN Guidelines and other stimulating transmission connections support programmes Inogate and MEDA
Conclusions Dialogue and cooperation EU with the key suppliers such as Russia and Algeria Stimulate investment in alternative gas supply routes and connections in EU-30 Secure inter-operability of gas networks in EU-30 and implement EU policies on SoS Create a stable economic and investment climate and allow for longer term contracts More backing of EU and Investment banks for cross-border large pipeline projects
Implications supply infrastructure in 2030 (Bcm) LNG Pipeline 83 Russia Latin America 18 52 Central Asia - Caspian 72 70 120 40 160 Middle East 142 Africa - West and North
Structural change fuel consumption Poland, Hungary and Slovakia source: EU-30 study [%] 100 75 50 25 res Nucleair gas oil solids 0 2000 2030 2000 2030 2000 2030 PL HU SL
Structural change fuel input power sector Poland source: EU-30 study Mtoe 40 35 30 25 20 15 10 5 0 2000 2030 solids oil gas res
Structural Change Fuel input Final Demand Poland source: EU-30 study 100% 80% 60% 40% 20% other heat electr gas oil solids 0% 2000 2030
Gas demand scenarios to 2030 source: Engaged study for DGTREN MSCM 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 CR PL RO SK 2000 Ref Low High
Current Barriers to gas demand growth in CEE Uncertainties regarding: - Economic growth/world economy - Prices oil & gas supplies/world market - Liberalisation & transition of gas markets in EU - Investment in connections, services such as balancing and storage and thus creation of fully mature gas market Insufficient policies and regulations favouring long term structural change energy sector Limited gas import suppliers: SoS and competition Gas bubble in short run vs supply gap in long run Lack of availability of investments for developing the required gas infrastructure between consumers and more remote production locations
Recent EU Gas Market studies European Energy & Transport Trends EU by NTUA for EC, January 2004 World Energy Outlook update for EU-30 by IEA for Engaged study, October 2003 Engaged study by ECN & others EU, IEA institutes for DGTREN, December 2003
General EU policy objectives Strengthening the competitiveness of the Internal Energy Market in an enlarged EU Development of environmentally sound & sustainable energy markets Enhance Security of Supply in an enlarged Europe Modernisation Energy Systems in partner countries
Key assumptions for projecting gas demand in EU-30 IEA WEO update for EU-30 2000-2030: - Population growth 0.25% pa in 2000-2030 - GDP growth 2.3/2.0/1.6% pa in 2000-2030 - Fuel prices oil from 28/23$ (gas 3.0/3.6$ per Mbtu) in 2000/01 29$/boe (gas 3.8$ in 2030) - Coal prices flat $39/metric ton, after 2010 rising to $44 in 2030 - Ratio gas-to-oil price 0.93 in 2001 to 070 in 2030 Current policies on decommissioning nuclear plants, energy efficiency, renewables, greenhouse gas reduction and other environmental policies in EU MS
Future EU events on promoting DER/RES First International Conference on the Integration of Renewable Energy Sources and DER, 1 st -3 rd December 2004, Brussels Organisers: IRED cluster DG projects Objectives: Sharing knowledge of EU projects with USA, Japan and OECD Info: www.conference-on-integration.com