gas storage in europe, recent developments and outlook … storage in europe, recent.pdf · gas...

Gas Storage in Europe, recent

developments and outlook to 2035

Geoffroy Hureau

Secretary General

CEDIGAZ

European Gas Conference, 27-29 January 2015, Vienna

European storage market in 2014 Review of 2014 trends

Current challenges

Role of storage

Outlook to 2035 Supply/Demand factors

Estimated Storage needs

Project backlog

Conclusion: recovery post 2025?

Outline


CEDIGAZ

International association Around 90 members in 40 countries Reports and Databases Annual report on gas in the world,

thematic reports Gas Statistical Database: world

reserves, supply, demand, trade … Gas and LNG contracts database UGS: annual world database New LNG Service Fortnight News Reports on

worldwide gas development and unconventional gas

WORLD UGS STUDY (June 2013)

CEDIGAZ

More than 50 years of gas market intelligence

http://www.cedigaz.org/surveys/Underground-Gas-Storage.html


http://www.cedigaz.org/surveys/Underground-Gas-Storage.html

European* Gas Storage –

2014 Review and Challenges

* Europe 35


Total working capacity: 101 bcm 19 new UGS commissioned in the past 4 years (mainly salt cavern) + Extension of

existing sites 15 bcm added (40% in salt cavern, essentially in Germany)

European Storage Capacity – Jan. 2014

Source: CEDIGAZ, Underground Gas Storage Database, 2014


2.71.0

2.12.32.73.03.23.54.1

5.05.3

6.37.4

12.916.3

23.3

0 5 10 15 20 25

Others

Denmark

Poland

Latvia

Turkey

Slovakia

Romania

Czech Republic

Spain

United Kingdom

Netherlands

Hungary

Austria

France

Italy

Germany

Maximum Working Gas Capacity (bcm)

2014

2010

Source: Centrica Storage Ltd, Annual Reports, CEDIGAZ

Annual average SBU price and operating profits Centrica Storage Ltd, 2005-2013

Increased competition between storages

Excess gas supply leads to decreasing gas price spreads and volatility

Today, the market does not value storage assets

Storage Glut


490

500

510

520

530

540

550

560

570

580

70

75

80

85

90

95

100

105

Gas

de

man

d (

bcm

)

UG

S (b

cm)

Underground Gas Storage

Gas demand

-11%

New capacities are still being commissioned


67%11%

7%4%

4%3%2%2% Germany

Spain

Hungary

Romania

Netherlands

Portugal

Poland

United Kingdom

75%

25%

Salt caverns

Depleted Fields

• In 2014: Bergermeer 4.1 Bcm, 7Fields expansion 0.7 bcm, additional salt

cavers in Germany,…

• At the beginning of 2014 more than 20 bcm of additional capacity was

under construction with completion dates to 2025

2.5 bcm of new capacity added in 2013

Economic and operational consequences/Security of supply

Financial: investment in new seasonal storage?

Source: GSE, Aggregated Gas Storage Inventory

Evolution of European inventories (EU 28) vs. Working gas capacity

Low Utilization of Storage Facilities

36.5%38.6%

41.9%20.9%

92.6% 93.8% 90.9%

84.3%

44,8%


94,3%

Competition from other sources of flexibility?


3439 40 40

48

5753 55

69

88 89

68

52

0

10

20

30

40

50

60

70

80

90

100

LNG Imports (bcm)

X 3

0

5

10

15

20

25

30

35

2010 2011 2012 2013

LNG Seasonal Variations (bcm)

summer / T2-T3

winter / T4-T1 (n+1)

• Growth of LNG imports

• Greater market integration (interconnectors)

Seasonal flexibility in Europe

Seasonal variations in demand/supply (summer 2012 / winter 2012-2013)

Sources: IEA, ENTSOG, CEDIGAZ


Security of supply

UGS is the most reactive to sudden demand variations during cold spells

European winter supply profile

Source: ENTSOG


2012/2013

2013/2014

Oct Nov Dec Jan Feb Mar

Case study – winter 2012/2013 in the UK

Total Supply

UGS

IUK

LNG

UGS level Source: National Grid

Winter Consultation 2013/2014

Winter Outlook 2013/2014

• Well functioning European market

• LNG supply is highly unpredictable and linked

to global markets

• Main contribution of UK and continental storage


European Gas Storage –

Outlook to 2035


Future European Gas Demand and Supply


0

100

200

300

400

500

600

2013 2020 2035

LNG

Pipeline others

Pipeline Russia

Norway

Domestic production (excl.Norway)

34%22%

13%

21%23%

16%

512 532 585Bcm

External dependence

Without Norway

47%

68% 87%71%

2013-2035

Gas demand + 14%

Domestic production -37%

(-54% excl. Norway)

Imports +73%

(+46% excl. Norway)

+0.5%/yr+0.6%/yr

Decrease in domestic production (even with shale gas)

Decrease in production swings (Groningen)

A significant increase in gas imports + 73% (+46% without Norway) in 2035

Security of supply issues

New long-distance pipelines built

Supply and Demand Factors

A Surge in Gas Imports & dependence


45%

50%

55%

60%

65%

70%

75%

150

200

250

300

350

400

450

2010 2015 2020 2025 2030 2035

Import Production Dependence

More seasonal UGS needed for operational and strategic purposes

European natural gas demand prospects

0

20

40

60

80

100

120

140

2013 2020 2035

0

50

100

150

200

250

Growth 2020-2035

Growth 2013-2020

2013

• The expected growth in the residential-commercial and industrial sectors will mainly come from Turkey and

Southern Europe.

• Turkey is expected to become the third largest gas market in 2035.

• Potential for significant development of highly-flexible gas-fired power plants after 2020 to back-up

renewable power

Unit: Bcm

EU Gas demand in the Power sector

0

20

40

60

80

100

120

140

160

180

bcm

Germany Netherlands United Kingdom

Spain Italy France

Belgium Others

Gas demand by the power sector has decreased by 51 bcm between 2010&2013

The equivalent of the total French gas market…


Closure of aging coal power capacity

0 5 10

2013

2003

1993

1983

1973

1963

Lignite (64 GW)

0 5 10 15

2013

2003

1993

1983

1973

1963

Hard coal (128 GW)

GW

40% of capacity is more than 40 years old

Date of commissioning of EU coal power capacity

Source: Enerdata


Air emissions regulation (LCPD/IED)

• Large Combustion Plants Directive limits SOx and NOx emissions

• Opt in (FGD investment) or Opt out and close by end 2015

– 15 GW of old coal plants closed by end 2015 at the latest, mainly in UK and France (some already closed)

• Industrial Emissions Directive replaces LCPD on 1 January 2016

• Further tightens limits on SOx and NOx emissions

• Opt in (SCR investment) or Opt out and closure by 2023

• Some flexibity (Transitional National Plans)

– Additional closure of old coal-fired plants: 50 to 55 GW, mainly in the United Kingdom, Germany, Spain, Poland

These closures amount to almost a third of current EU coal capacity


EU-ETS reform

Can the phoenix rise from the ashes?

• Structural reform of the EU ETS

• 2030 Climate and Energy Framework

• Emissions reduction by 40% by 2030

• Fast-track EUAs backloading (Feb 2014)

• Market stability reserve

Different possible futures

Source: Climate Economics Chaire, January 2014


Market hubs/Gas trading need UGS (cf. US development)

Flexible UGS close to market hubs

Market-based pricing

Less flexibility in gas export contracts

More flexibility/UGS needed

More network balancing needs

Greater interconnectivity of the European network

Less UGS and reliance on neighbouring flexibility/UGS ?

But limited to short-distance neighbouring countries

More cross-border UGS built (ex: Epe)

A « European » storage market

Market Liberalization

Reinforced commercial role of UGS


A changing landscape: new players are entering the storage business for operational and strategic reasons

Source: CEDIGAZ, Underground Gas Storage in the World, 2013

European Gas Storage Players – Working Gas Capacity, 2013

Market Liberalization

New entrants in UGS

Takes into account recent acquisitions and direct shares owned in foreign storage/utility companies.


Source: CEDIGAZ, November 2014

An additional need of around 45 bcm by 2035

But overcapacity is likely to last until 2025

Estimates of European UGS Needs by

2035


81 8288

99

107

120

134

147

0

20

40

60

80

100

120

140

160

2000 2005 2010 2013 2020 2025 2030 2035

Yet to be FIDed

Under construction

Operational

WGC

22 bcm Under Construction

54 bcm at various stages of planning

Total identified projects (at beg. of 2014): 77 bcm (highly competitive market)

Under construction: 22 bcm (with a completion date up to 2025)

Source: CEDIGAZ, Underground Gas Storage Database

Europe: Planned Working Gas Capacities


0 2,000 4,000 6,000 8,000 10,000 12,000

Bosnia & Herz.RomaniaDenmark

IrelandCzech Republic

AlbaniaSlovakia

FranceBulgaria

SpainPoland

PortugalCroatiaSerbia

AustriaNetherlands

LatviaTurkey

ItalyGermany

United Kingdom

mmcm

Under construction

Planned

Conclusion: possible recovery post 2025

Over capacity expected until 2025

Supply & demand evolution, market liberalization and environmental constraints

on coal will drive a new period of growth for UGS

Cedigaz estimates that European UGS capacity will increase by around 45 bcm by

2035

77 bcm of UGS projects

Of which 22 bcm under construction

A majority of salt-cavern projects (market liberalization)

Not so much new seasonal storage (security of supply?)

Not all planned storage will be built

Projects under competition for the same (regional) market

The situation is quite contrasted between NW Europe and South-Southeast Europe (and UK)

Challenges: investment and security of supply


Thank you for your attention

[email protected]

www.cedigaz.org


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