Upload
others
View
0
Download
0
Embed Size (px)
Citation preview
OX
FOR
D I
NST
ITU
TE F
OR
EN
ERG
Y S
TUD
IES
Nat
ura
l Gas
Re
sear
ch P
rogr
amm
eO
XFO
RD
IN
STIT
UTE
FO
R E
NER
GY
STU
DIE
S N
atu
ral G
as R
ese
arch
Pro
gram
me
The global effect of LNG growth on European gas markets
Dr Thierry Bros
19th European Gas Conference – Oslo – 29/30 May 2018
Senior Research Fellow
OX
FOR
D I
NST
ITU
TE F
OR
EN
ERG
Y S
TUD
IES
Nat
ura
l Gas
Re
sear
ch P
rogr
amm
e
Gas markets work
Date Event Market ResultsState
intervention
2011Fukushima: 7% of global
LNG rerouted to Japan
Higher prices in Asia and
Europe with demand
destruction
No
2014 US Polar Vortex
Short-lived higher HH prices
with fuel substitution in
power generation
No
2015Groningen cap: loss of
9% of European supplyLower prices No
Winter
2016/2017
Cold weather & nuclear
shortages in France
Short-lived higher prices in
Southern Europe
Greece and
Italy declare
alert
12 Dec. 2017 Baumgarten blastVery short-lived spike mainly
in Italy
Italy declares
emergency
Jan 2018 US cold bomb cycloneShort-lived spike in New York (First Yamal LNG cargo to
Boston)
No
Feb 2018 Siberian weather in EU Short-lived spike in EU No2
OX
FOR
D I
NST
ITU
TE F
OR
EN
ERG
Y S
TUD
IES
Nat
ura
l Gas
Re
sear
ch P
rogr
amm
e
EU sentiment changes vis-à-vis gas…
• Gas demand growing since 2014
• Gas infrastructure is the batteries of the new energy system
• Complete electrification will not work
• Gas is not just a bridge fuel for renewables, but it has its own future in Europe
• EU hasn’t stopped already all public funding for new interconnections
3Source: Florence School of Regulation
OX
FOR
D I
NST
ITU
TE F
OR
EN
ERG
Y S
TUD
IES
Nat
ura
l Gas
Re
sear
ch P
rogr
amm
e
… But Europe’s schizophrenia remains
Policy makers Energy managers
On a foreign policy side, Russia is not an EU friend…
…but on the energy side Gazprom is the cheapest gas supplier than can, on top, provide any additional gas we may need.
EU Commission focus on consumers benefits (unbundling or roaming charges in telecoms)
Traditional energy managers focus on today’s P&L (integration, etc.)
4
With increased interdependency, how is Europe’s
schizophrenia going to evolve?
Who’s going to decide?
OX
FOR
D I
NST
ITU
TE F
OR
EN
ERG
Y S
TUD
IES
Nat
ura
l Gas
Re
sear
ch P
rogr
amm
e
#FactCheck
5
Facts Fake News
If global gas markets were to tighten, Russia could quickly ramp up pipeline gas exports to Europe and displace some LNG there that could then be re-routed to alleviate shortages elsewhere.
Thanks to several comparative advantages, primarily the size of its reserves, the proximity of its current markets, its spare capacity (…) Gazprom is in a position to deploy strategy designed to create uncertainty about the price of gas.
OX
FOR
D I
NST
ITU
TE F
OR
EN
ERG
Y S
TUD
IES
Nat
ura
l Gas
Re
sear
ch P
rogr
amm
e
Gazprom doesn’t flood EU
6
Source: Gazprom, Entsog, thierrybros.com
OX
FOR
D I
NST
ITU
TE F
OR
EN
ERG
Y S
TUD
IES
Nat
ura
l Gas
Re
sear
ch P
rogr
amm
e
3 options for Russia to manage prices
• Tightening supply - Increasing producers’ rent
• Demand destruction but no impact on exports
• 2012-2013
• Prompted new FIDs
High7.5$/Mbtu min
• Swinging supply
• Since 2014
• Most profitable in the long term
Med.c.6$/Mbtu
• Use of spare capacity
• Price war to shut in US LNG
• Lower revenues
• Can be done sporadically
Low4.5$/Mbtu max
7
OX
FOR
D I
NST
ITU
TE F
OR
EN
ERG
Y S
TUD
IES
Nat
ura
l Gas
Re
sear
ch P
rogr
amm
e
Month-Ahead Gas Prices
8Source: Argus Media, thierrybros.com
0
2
4
6
8
10
12
Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18
$/M
btu
All contracts roll on 16th - month 1 (1-15) month 2 (16-31)
LNG tightness (USGC FOB - HH) Anea TTF HH
OX
FOR
D I
NST
ITU
TE F
OR
EN
ERG
Y S
TUD
IES
Nat
ura
l Gas
Re
sear
ch P
rogr
amm
e
Preservation of competition• US Sherman Antitrust Act 1890
“An act to protect trade and commerce against unlawful restraints and monopolies”
• ACER 2017 Report on the Results of Monitoring the Internal Markets “Markets in NWE tend to score better on
metrics related to diversity of supply and upstream concentration. This results in better performing hubs”
2016 gross welfare losses: €3.5bn
• EU DG Competition “Competition policy in Europe is a vital
part of the internal market. Its aim is to provide everyone in Europe with better quality goods and services at lower prices. Competition policy is about applying rules to make sure companies compete fairly with each other. These are the reasons why the EU fights anticompetitive behaviour and encourages liberalisation.”
9
Source: ACER 2017 Report on the
Results of Monitoring the Internal
Markets
OX
FOR
D I
NST
ITU
TE F
OR
EN
ERG
Y S
TUD
IES
Nat
ura
l Gas
Re
sear
ch P
rogr
amm
e
LNG supply growth
•32% of trade and growing
• Impacts also storage
•More buyers & sellers
• Increases global liquidity
•Even if more expensive than pipe, a low cost LNG project can thrive
•Customers are always better off
•Suppliers have to select low cost projects to be profitable
Competition Optionality
Security of Supply
Diversification
10
OX
FOR
D I
NST
ITU
TE F
OR
EN
ERG
Y S
TUD
IES
Nat
ura
l Gas
Re
sear
ch P
rogr
amm
e
Major projects to come on-line(on a FID basis)
11
Source: thierrybros.com
LNG only for North America & AustraliaNo upstream project in Trinidad and Tobago & Peru (LNG producers)
Russia25%
US21%
Egypt15%
Australia9%
Iran6%
Azerbaijan5%
Israel4%
Others15%
US52%
Australia23%
Russia18%
Others7%
LNG capacity
Russia30%
Egypt24%
Iran10%
Azerbaijan9%
Israel6%
Oman5%
Others16%
Pipe gas capacity
OX
FOR
D I
NST
ITU
TE F
OR
EN
ERG
Y S
TUD
IES
Nat
ura
l Gas
Re
sear
ch P
rogr
amm
e
Gas spare capacity
12
Source: thierrybros.com
Assuming transit via Ukraine unaffected, Groningen cap at 12 bcm/y & no major unconventional gas production in China
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
0
20
40
60
80
100
120
140
160
2016 2017 2021e (1.6% CAGR) 2021e (2% CAGR)
% o
f an
nu
al d
eman
d
bcm
Spare capacity (bcm) Spare capacity in % of wolrd consumption
OX
FOR
D I
NST
ITU
TE F
OR
EN
ERG
Y S
TUD
IES
Nat
ura
l Gas
Re
sear
ch P
rogr
amm
e
Quo Vadis
Quo Vadis• Is the EU gas sector framework
the most effective in order to maximize overall EU welfare?
• Following Naftogaz-Gazprom arbitration, same price in Ukraine and Germany
• Following EU Gazprom antitrust settlement, companies have the ability to switch Gazprom delivery point
Konoplyanik design• Proposal to establish a new
Ljubljana-based Soviet-style GOSPLAN… with an anti-Russian flavor
• Move delivery points of Russian gas to EU external border with higher entry tariffs to create entry barriers
• Great idea to be looked into!
13
Solution: one enlarged EU single zone with a single wholesale price, an entry fee and 2 exit fees to differentiate customers needing SoS and others
Validity of regulated transport tariffs (Norwegian Court of Appeal, June 2017)
OX
FOR
D I
NST
ITU
TE F
OR
EN
ERG
Y S
TUD
IES
Nat
ura
l Gas
Re
sear
ch P
rogr
amm
e
Thank you
14
Twitter: @thierry_bros