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Gas Storage in Europe, recent
developments and outlook to 2035
Geoffroy Hureau
Secretary General
CEDIGAZ
European Gas Conference, 27-29 January 2015, Vienna
European storage market in 2014 Review of 2014 trends
Current challenges
Role of storage
Outlook to 2035 Supply/Demand factors
Estimated Storage needs
Project backlog
Conclusion: recovery post 2025?
Outline
European Gas Conference, 27-29 January 2015, Vienna
CEDIGAZ
International association Around 90 members in 40 countries Reports and Databases Annual report on gas in the world,
thematic reports Gas Statistical Database: world
reserves, supply, demand, trade … Gas and LNG contracts database UGS: annual world database New LNG Service Fortnight News Reports on
worldwide gas development and unconventional gas
WORLD UGS STUDY (June 2013)
CEDIGAZ
More than 50 years of gas market intelligence
http://www.cedigaz.org/surveys/Underground-Gas-Storage.html
European Gas Conference, 27-29 January 2015, Vienna
European* Gas Storage –
2014 Review and Challenges
* Europe 35
European Gas Conference, 27-29 January 2015, Vienna
Total working capacity: 101 bcm 19 new UGS commissioned in the past 4 years (mainly salt cavern) + Extension of
existing sites 15 bcm added (40% in salt cavern, essentially in Germany)
European Storage Capacity – Jan. 2014
Source: CEDIGAZ, Underground Gas Storage Database, 2014
European Gas Conference, 27-29 January 2015, Vienna
2.71.0
2.12.32.73.03.23.54.1
5.05.3
6.37.4
12.916.3
23.3
0 5 10 15 20 25
Others
Denmark
Poland
Latvia
Turkey
Slovakia
Romania
Czech Republic
Spain
United Kingdom
Netherlands
Hungary
Austria
France
Italy
Germany
Maximum Working Gas Capacity (bcm)
2014
2010
Source: Centrica Storage Ltd, Annual Reports, CEDIGAZ
Annual average SBU price and operating profits Centrica Storage Ltd, 2005-2013
Increased competition between storages
Excess gas supply leads to decreasing gas price spreads and volatility
Today, the market does not value storage assets
Storage Glut
European Gas Conference, 27-29 January 2015, Vienna
490
500
510
520
530
540
550
560
570
580
70
75
80
85
90
95
100
105
Gas
de
man
d (
bcm
)
UG
S (b
cm)
Underground Gas Storage
Gas demand
-11%
New capacities are still being commissioned
European Gas Conference, 27-29 January 2015, Vienna
67%11%
7%4%
4%3%2%2% Germany
Spain
Hungary
Romania
Netherlands
Portugal
Poland
United Kingdom
75%
25%
Salt caverns
Depleted Fields
• In 2014: Bergermeer 4.1 Bcm, 7Fields expansion 0.7 bcm, additional salt
cavers in Germany,…
• At the beginning of 2014 more than 20 bcm of additional capacity was
under construction with completion dates to 2025
2.5 bcm of new capacity added in 2013
Economic and operational consequences/Security of supply
Financial: investment in new seasonal storage?
Source: GSE, Aggregated Gas Storage Inventory
Evolution of European inventories (EU 28) vs. Working gas capacity
Low Utilization of Storage Facilities
36.5%38.6%
41.9%20.9%
92.6% 93.8% 90.9%
84.3%
44,8%
European Gas Conference, 27-29 January 2015, Vienna
94,3%
Competition from other sources of flexibility?
European Gas Conference, 27-29 January 2015, Vienna
3439 40 40
48
5753 55
69
88 89
68
52
0
10
20
30
40
50
60
70
80
90
100
LNG Imports (bcm)
X 3
0
5
10
15
20
25
30
35
2010 2011 2012 2013
LNG Seasonal Variations (bcm)
summer / T2-T3
winter / T4-T1 (n+1)
• Growth of LNG imports
• Greater market integration (interconnectors)
Seasonal flexibility in Europe
Seasonal variations in demand/supply (summer 2012 / winter 2012-2013)
Sources: IEA, ENTSOG, CEDIGAZ
European Gas Conference, 27-29 January 2015, Vienna
Security of supply
UGS is the most reactive to sudden demand variations during cold spells
European winter supply profile
Source: ENTSOG
European Gas Conference, 27-29 January 2015, Vienna
2012/2013
2013/2014
Oct Nov Dec Jan Feb Mar
Case study – winter 2012/2013 in the UK
Total Supply
UGS
IUK
LNG
UGS level Source: National Grid
Winter Consultation 2013/2014
Winter Outlook 2013/2014
• Well functioning European market
• LNG supply is highly unpredictable and linked
to global markets
• Main contribution of UK and continental storage
European Gas Conference, 27-29 January 2015, Vienna
European Gas Storage –
Outlook to 2035
European Gas Conference, 27-29 January 2015, Vienna
Future European Gas Demand and Supply
European Gas Conference, 27-29 January 2015, Vienna
0
100
200
300
400
500
600
2013 2020 2035
LNG
Pipeline others
Pipeline Russia
Norway
Domestic production (excl.Norway)
34%22%
13%
21%23%
16%
512 532 585Bcm
External dependence
Without Norway
47%
68% 87%71%
2013-2035
Gas demand + 14%
Domestic production -37%
(-54% excl. Norway)
Imports +73%
(+46% excl. Norway)
+0.5%/yr+0.6%/yr
Decrease in domestic production (even with shale gas)
Decrease in production swings (Groningen)
A significant increase in gas imports + 73% (+46% without Norway) in 2035
Security of supply issues
New long-distance pipelines built
Supply and Demand Factors
A Surge in Gas Imports & dependence
European Gas Conference, 27-29 January 2015, Vienna
45%
50%
55%
60%
65%
70%
75%
150
200
250
300
350
400
450
2010 2015 2020 2025 2030 2035
Import Production Dependence
More seasonal UGS needed for operational and strategic purposes
European natural gas demand prospects
0
20
40
60
80
100
120
140
2013 2020 2035
0
50
100
150
200
250
Growth 2020-2035
Growth 2013-2020
2013
• The expected growth in the residential-commercial and industrial sectors will mainly come from Turkey and
Southern Europe.
• Turkey is expected to become the third largest gas market in 2035.
• Potential for significant development of highly-flexible gas-fired power plants after 2020 to back-up
renewable power
Unit: Bcm
EU Gas demand in the Power sector
0
20
40
60
80
100
120
140
160
180
bcm
Germany Netherlands United Kingdom
Spain Italy France
Belgium Others
Gas demand by the power sector has decreased by 51 bcm between 2010&2013
The equivalent of the total French gas market…
European Gas Conference, 27-29 January 2015, Vienna
Closure of aging coal power capacity
0 5 10
2013
2003
1993
1983
1973
1963
Lignite (64 GW)
0 5 10 15
2013
2003
1993
1983
1973
1963
Hard coal (128 GW)
GW
40% of capacity is more than 40 years old
Date of commissioning of EU coal power capacity
Source: Enerdata
European Gas Conference, 27-29 January 2015, Vienna
Air emissions regulation (LCPD/IED)
• Large Combustion Plants Directive limits SOx and NOx emissions
• Opt in (FGD investment) or Opt out and close by end 2015
– 15 GW of old coal plants closed by end 2015 at the latest, mainly in UK and France (some already closed)
• Industrial Emissions Directive replaces LCPD on 1 January 2016
• Further tightens limits on SOx and NOx emissions
• Opt in (SCR investment) or Opt out and closure by 2023
• Some flexibity (Transitional National Plans)
– Additional closure of old coal-fired plants: 50 to 55 GW, mainly in the United Kingdom, Germany, Spain, Poland
These closures amount to almost a third of current EU coal capacity
European Gas Conference, 27-29 January 2015, Vienna
EU-ETS reform
Can the phoenix rise from the ashes?
• Structural reform of the EU ETS
• 2030 Climate and Energy Framework
• Emissions reduction by 40% by 2030
• Fast-track EUAs backloading (Feb 2014)
• Market stability reserve
Different possible futures
Source: Climate Economics Chaire, January 2014
European Gas Conference, 27-29 January 2015, Vienna
Market hubs/Gas trading need UGS (cf. US development)
Flexible UGS close to market hubs
Market-based pricing
Less flexibility in gas export contracts
More flexibility/UGS needed
More network balancing needs
Greater interconnectivity of the European network
Less UGS and reliance on neighbouring flexibility/UGS ?
But limited to short-distance neighbouring countries
More cross-border UGS built (ex: Epe)
A « European » storage market
Market Liberalization
Reinforced commercial role of UGS
European Gas Conference, 27-29 January 2015, Vienna
A changing landscape: new players are entering the storage business for operational and strategic reasons
Source: CEDIGAZ, Underground Gas Storage in the World, 2013
European Gas Storage Players – Working Gas Capacity, 2013
Market Liberalization
New entrants in UGS
Takes into account recent acquisitions and direct shares owned in foreign storage/utility companies.
European Gas Conference, 27-29 January 2015, Vienna
Source: CEDIGAZ, November 2014
An additional need of around 45 bcm by 2035
But overcapacity is likely to last until 2025
Estimates of European UGS Needs by
2035
European Gas Conference, 27-29 January 2015, Vienna
81 8288
99
107
120
134
147
0
20
40
60
80
100
120
140
160
2000 2005 2010 2013 2020 2025 2030 2035
Yet to be FIDed
Under construction
Operational
WGC
22 bcm Under Construction
54 bcm at various stages of planning
Total identified projects (at beg. of 2014): 77 bcm (highly competitive market)
Under construction: 22 bcm (with a completion date up to 2025)
Source: CEDIGAZ, Underground Gas Storage Database
Europe: Planned Working Gas Capacities
European Gas Conference, 27-29 January 2015, Vienna
0 2,000 4,000 6,000 8,000 10,000 12,000
Bosnia & Herz.RomaniaDenmark
IrelandCzech Republic
AlbaniaSlovakia
FranceBulgaria
SpainPoland
PortugalCroatiaSerbia
AustriaNetherlands
LatviaTurkey
ItalyGermany
United Kingdom
mmcm
Under construction
Planned
Conclusion: possible recovery post 2025
Over capacity expected until 2025
Supply & demand evolution, market liberalization and environmental constraints
on coal will drive a new period of growth for UGS
Cedigaz estimates that European UGS capacity will increase by around 45 bcm by
2035
77 bcm of UGS projects
Of which 22 bcm under construction
A majority of salt-cavern projects (market liberalization)
Not so much new seasonal storage (security of supply?)
Not all planned storage will be built
Projects under competition for the same (regional) market
The situation is quite contrasted between NW Europe and South-Southeast Europe (and UK)
Challenges: investment and security of supply
European Gas Conference, 27-29 January 2015, Vienna
Thank you for your attention
www.cedigaz.org
European Gas Conference, 27-29 January 2015, Vienna