Stepping on the gas: European gas

The full article from Statoil can be found in the January 2013 issue of Hydrocarbon Engineering.

This year, perhaps more so than any in the preceding decade, it is important to review the political and economic backdrop against which Statoil and many other energy companies are operating in European gas markets. Politics is arguably having the largest impact on the energy markets these days. At the highest levels in Europe, there exists an ambitious package of policy prescriptions intended to reduce the EU’s carbon dioxide emissions by 20% from 1990 levels by 2020, initiated by the European Climate Change Programme (ECCP). On top of this, the European Commission has initiated many climate related measures aimed at promoting electricity from renewable energy, voluntary commitments by car manufacturers to reduce CO₂ emissions by 25% and proposals on the taxation of energy products.

Supply

There have been a number of developments over the last two years that will likely shape the future level of gas supply into Europe: most notably the North American shale gas discoveries, but also new LNG export facilities, prospects of new supply from the Caspian region and new discoveries in the North Sea. Already the share of gas in the overall energy mix, which had remained at 16% from the late 1960s – 1990s, has risen to 21% in 2011.

Pipeline gas

In September 2011, natural gas was fed into the first string of the Nord Stream gas pipeline, beginning the commercial supplies of Russian gas directly to the EU. Gas imports to the EU are anticipated to grow in the coming decade by nearly 200 billion m³, which would be more than a third of current total demand. As such, the new gas pipeline is a significant development for the gas industry.

LNG

The US looks set to become a net exporter of LNG by 2021, according to the Annual Energy Outlook 2012. This should also have a significant impact on global prices, with the potential for prices to have new global benchmarks. With increased production, average annual wellhead prices for natural gas will remain below US$ 5/1000 ft³ (2010 dollars) through 2023. These projected prices reflect continued US industry successes in tapping the extensive shale gas resource. After 2023, natural gas prices will generally increase as the numbers of tight gas and shale gas wells drilled increase to meet growing domestic demand for natural gas and offset declines in natural gas production from other sources.

Outlook

Gas is a fuel for the long term and abundant resources combined with favourable environmental attributes add to the benefits. Regardless of the outlook for shale and the current political climate in Europe, gas is expected to remain a critical part of the energy mix, especially for heating purposes, but increasingly (and more sensibly) in power generation. The Norwegian Continental Shelf (NCS) will continue to be an important source of reliable and competitive gas for Northern Europe, and potential Arctic resources will begin to play into this picture. New NCS discoveries this year combined with field development plans will assure supply to underwrite Europe’s return to economic growth and long term supply contracts will help to provide the required level of certainty that investors need.

The full article from Statoil can be found in the January 2013 issue of Hydrocarbon Engineering.

Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/09012013/statoil_european_gas_report_285/