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European gas market: Quarterly report

Hydrocarbon Engineering,

The mild weather over the 2013 - 2014 winter along with only small improvements in economic performance have meant relatively stable gas consumption levels in Europe during the period, relative to the 2012 – 2013 winter period.

Gas has continued to lose its share in the power generation sector to coal and renewables. In 2013, gas attained 12.4% of electricity production in the EU, down from 2011 levels of 16%.

At the end of the first half of this year, the situation in Ukraine had had no observable impact on imports of natural gas from Russia into the EU. However, by the same time imports from Russia had hit record levels. Yet, the growth in imports of natural gas from Russia in2014 has been considerably less than in 2013.

Imports of piped gas from Russia to the EU increased by 7% between the start of 2013 and the first half of 2014 but pipeline imports from Norway and North Africa dropped between the time period.

Due to subdued gas demand in Q2 2014, LNG prices have fallen in Europe and Asia.

The 5% decrease in LNG volumes registered in the first five months of this year was far less than the drop over the same periods in 2012 and 2013. Six of the eight countries in the EU that import LNG registered a drop in total LNG import volumes in the first five months of this year.

The total volumes traded on European gas hubs in the year to May 2014 were relatively stable compared to the previous year.

In the first half of this year, day ahead prices on European gas hubs fell significantly due to lower demand for storage injection after a mild winter and weak Asian demand.

This year, convergence in prices on European gas hubs has increased even more.

During 2013, the EU industry was paying on average, 8% more for gas than in the year before.

Since the start of this year, the wholesale price differential between the EU and US has fallen by a factor of two. This has been attributed to a strong decline in hub prices in Europe and an increase in US prices.

Adapted from a report by Claira Lloyd.

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