Last Updated : 11 August 2012 at 11:40 IST
Renewables, pipeline supplies to offset Europe LNG tightness: Barclays
Source :Barclays weekly update
“In Europe, the potential golden age of gas has somewhat stalled as relative pricing no longer favours the fuel in power generation and the number of new-build, gas-fired power projects begin to stall as the uptake of renewable power generation tips the region’s power markets into capacity over-supply. Europe, for its part, will continue to rely on pipeline gas to meet its natural gas needs.” the report noted.
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LONDON(Commodity Online): LNG market for the coming five years will increasingly tighten and the residual volumes left for Europe will shrink for the next few years, before the market starts to loosen, said Barclays in a report.
Barclays estimates that the LNG available for Europe will fall from 2012 levels of 46 mtpa to around 15 mtpa by 2015, before starting to increase back to current levels as the large Australian trains ramp up production and US exports of LNG begin.
“In Europe, the potential golden age of gas has somewhat stalled as relative pricing no longer favours the fuel in power generation and the number of new-build, gas-fired power projects begin to stall as the uptake of renewable power generation tips the region’s power markets into capacity over-supply. Europe, for its part, will continue to rely on pipeline gas to meet its natural gas needs.” the report noted.
Asian LNG demand
One of the most notable trends in the global gas market this year has been the redirecting of LNG away from Europe towards Asia, with European takes down by 33% y/y in H1 12 (50% in the UK alone) while Asian takes are up by 16% y/y.
Asian demand, heightened by additional demand from Japan and new regasification facilities in China, India and others, has pulled gas away from Europe, which is seeing lower demand and greater competition to LNG from pipeline supply.
While these current trends will persist for the remainder of the year, the future for the global gas trade is one that is coloured by a large number of moving pieces. On the supply side, there are large LNG liquefaction projects as diverse as coal-seam gas projects in Australia, the potential for North American shale volumes to be exported globally, and projects in brand new basins that are just being explored (East Africa, East Mediterranean).
On the demand side, there is the current trend for Asian markets to take more and more LNG, and these are being reinforced with a large number of regasification projects under development as Japan seeks to replace much of its nuclear power and countries like China and India look to natural gas to help diversify their energy mix and moderate their dependence on coal.
