Events
CIEP Gas Market Seminar: "The future role of LNG in European natural gas markets." October 21st, 2003
Declining natural gas production in the European Union, especially in the UK, and the projected strong increase in natural gas consumption make a strong increase of gas imports to the European Union in the next decades necessary. Liquefied natural gas (LNG) from various sources is likely to contribute considerably to these projected imports, apart from increasing pipeline supplies from Norway, Russia and Algeria. The position of LNG in the future European gas markets is not clear-cut. In comparison to pipeline supplies LNG offers a variety of advantages. Projects are usually of smaller scale which makes the marketing of incremental gas supplies easier, problems which can occur in pipeline trade with transit countries are de facto not existent and eventually LNG offers choice between a wider variety of suppliers. On the other hand, in many markets LNG faces a cost disadvantage in comparison to pipeline gas.
The business environment for gas trade is also gradually changing. Traditionally, as the basis of both pipeline and LNG projects, there have been long-term contracts, which allocate price and volume risks of the gas trade involved among producers and consumers. More recently LNG liquefaction plants, LNG carriers and receiving terminals have been constructed without their capacities being fully assigned to such long-term supply contracts. This kind of ‘speculative’ investment, if occurring also in the EU, could benefit a competitive European gas market. Moreover, by creating the possibility for arbitrage, spare capacities in LNG shipping and receiving facilities can link markets like the US and the EU, which are currently widely separated.
Increased interest for LNG is evolving at a time when the gas industry in the European Union is adapting to the liberalisation of the gas market. The way, in which liberalised markets are regulated, is another factor influencing the opportunities for LNG in European gas markets.
In a meeting on 21 October 2003 CIEP research staff discussed with industry and government representatives the issues around LNG mentioned above, with a particular focus on the future importance of LNG in the EU market. A summary of the main findings can be downloaded below.
- Pipeline business is so boring... (PDF, 146 KB)
- Relevant background information: The role of Liquefied Natural Gas (LNG) in the European gas market