Embed Size (px)
Citation preview
The impact of global developments on the British gas market
Professor Jonathan Stern Chairman and Senior Research Fellow
OIES Gas Programme
Ofgem Winter Outlook Seminar
London, October 28, 2014
AGENDA
THE (RECENT) PAST:
• Price developments post-2008
• LNG arrival and departure
THE PRESENT – a Russia-Ukraine winter
crisis?
THE FUTURE (up to 2020):
• Regional price differentials
• Increasing LNG availability
2
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
The Recent Past
3
OX
FOR
D IN
STIT
UTE
FO
R E
NER
GY
STU
DIE
S N
atu
ral G
as R
ese
arch
Pro
gram
me
Day-Ahead OTC prices at 10 European Hubs 2012-14
20
22
24
26
28
30
32
34
36
38
40
NBP ZEE TTF GSL NCG CEGH PSV PEGN PEGS
NBP delinks during the summer (IUK maintenance); but
overall correlation with NW Continental European hub
prices is high
PSV
NBP
Mar 13 spike Feb 12 spike
PEGS
CEGH
Source: Petrovich/OIES based on data from Tankard Parties
OX
FO
RD
IN
ST
ITU
TE
FO
R E
NE
RG
Y S
TU
DIE
S N
atu
ral G
as
Re
se
arc
h P
rog
ram
me
0
50
100
150
200
250
300
350
mm
cm/d
ay
Netherlands
UK
Portugal
Italy
Greece
Belgium
Turkey
France
Spain
Ebb and Flow of European LNG Imports: 2005-14
Source: Platts
OX
FO
RD
IN
ST
ITU
TE
FO
R E
NE
RG
Y S
TU
DIE
S N
atu
ral G
as
Re
se
arc
h P
rog
ram
me
0
100
200
300
400
500
600
700
800
900
mm
cm/d
ay
Thailand
Japan
India
China
Taiwan
South Korea
Asian LNG Imports: 2005-14
Source: Platts
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
The Present:
a Russia/Ukraine winter crisis?
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
A Russia-Ukraine Crisis: will it happen?
ARGUMENTS FOR:
Still no compromise between the two sides: Ukraine will not pay debts, Russia will not restart deliveries to Ukraine without payment
Ukraine says it needs 4-5 Bcm of Russian gas to get through the winter; we believe the figure is closer to 7-8 Bcm
If Ukraine steals gas, Russia will cut off supply
ARGUMENTS AGAINST:
Storages full everywhere – most are well-prepared
If there is a complete interruption through Ukraine, Russia can still deliver around 60% of volumes via Yamal, Blue Stream and Nord Stream (but South East Europe would be in trouble after a few weeks) 8
OX
FO
RD
IN
ST
ITU
TE
FO
R E
NE
RG
Y S
TU
DIE
S N
atu
ral G
as
Re
se
arc
h P
rog
ram
me
Monthly Gas Demand in North and Central Europe
October-June 2013-14 vs 2012-13
-
10
20
30
40
50
60
70
80
oct nov dec jan feb mar apr may jun
bcm 2012 - 13
2013 - 14
A 56 bcm fall in a
single year!!
Source: IEA Monthly Gas Survey
European gas demand disaster means any crisis
will be less acute
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
UK Gas Demand 1970-2013
10 Gas demand in 2013 was below the level of 1996
Source: Digest of UK Energy Statistics 2014, Figure 4.1.2, p.233
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
The Future up to 2020
11
Natu
ral
Gas R
ese
arc
h P
rog
ram
me
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 Europe Gas Demand: currently at lowest levels
for 20 years; very slow recovery projected Bcm
Source: Honore’ OIES (2014)
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 National Grid UK Gas Demand Scenarios: fairly
flat to 2035
13
TOTAL GAS DEMAND
PEAK GAS DEMAND Source: National Grid, UK Future Energy
Scenarios, July 2014, Figures 112/113, pp. 174-5
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 Availability for Europe
There is a huge number of new LNG projects – US and
non-US - due to start exporting from 2015 onwards
Europe has ~200 Bcm/year of regasification capacity
The main variables which will determine how much is
available for Europe will be:
Asian, especially Chinese, gas demand
North American gas prices – and therefore viability
of LNG export projects
Willingness of European buyers to compete
internationally with Asian, Middle Eastern and South
American buyers
14
NW and Southern Europe have substantial LNG import
capacity; actual imports will increasingly depend on
price competition with Russian pipeline gas
Annual Average Henry Hub Spot Prices 1990-2040
(2012 $MMbtu)
Source: Annual Energy Outlook 2014, Figure MT41, p.MT 22 15
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’s long term take or pay contracts
with European customers to 2030
16
Even at 70% ToP, Gazprom’s average annual sales
exceed 100 Bcm/year until the mid-2020s
Source: ERI RAS in Henderson
and Pirani (OIES 2014)
Natu
ral
Gas R
ese
arc
h P
rog
ram
me
Conclusions British gas market development has to be
viewed through the lens of a European – and an increasingly global – gas market
This requires very much more complex analysis than previously and means that…
British supply/demand trends have a much less important on medium/long term trends than external events, in particular:
Russia/Ukraine problems
global LNG supply/demand trends
Stagnant demand and increasing LNG supply are likely to keep prices down post-2015 but a Russia/Ukraine crisis this winter could create a difficult situation during January-March 2015
17
18 18
OIES Natural Gas Research Programme WE ARE:
• A gas research programme at a Recognised Independent Research Centre of
Oxford University, specialising in fossil fuel research
• Probably the only European academic research group focussed on natural
gas.
WE PRODUCE: independent research on national and international gas issues
WE ARE FUNDED BY: sponsorship by 20 companies and governments in gas
producing and consuming countries
WE ARE NOT:
• consultants, sellers of exclusive, high price business reports
Research referred to in this presentation can be downloaded
without charge from our website:
http://www.oxfordenergy.org/gas-programme/
THANK YOU
