Aurora are pleased to present the latest edition of our European Gas Markets Forecast. It presents Aurora’s latest view on the state of the European gas markets, and includes our updated outlook on natural gas prices to 2040, as well as detailed analysis of market and policy developments, including in this edition – a special focus on the EU’s network code on harmonised tariffs (TAR-NC).
Key highlights include:
- NW European gas prices are an average of €0.16/MWh (or 0.7%) higher between 2019 and 2025 relative to our October 2018 forecast. The only slight increase in prices since the last forecast is due to lower Asian demand owing to a mild start to winter and a well-supplied LNG market. Prices are unchanged beyond 2025 until the end of the forecast horizon.
- On the market and policy front, three key developments have occurred since our last report in October, which could be of note to participants in European gas markets:
- Firstly, smaller scale African LNG capacity continued its battle for market share with larger-scale US LNG projects, as the Greater Tortue and Golden Pass export projects both received FID. This occurred despite a slight dip in the Asian demand story, as Bangladesh cancelled plans for an LNG import contract with a Swiss trading house, Pakistan sought credit terms for its LNG imports and another nuclear reactor came online in Japan, suggesting decreased Japanese LNG import demand in coming years. In Europe, the German government pledged support for 2 LNG import terminals on the North Coast.
- Secondly, progress was made by non-Russian pipelines, including the announcement of political agreement on the 20 bcm/a East Med pipeline connecting the Levantine gas fields to Southern Europe, the welding of the 31 bcm/a TANAP pipeline to the TAP pipeline in Turkey and a FID on the 10 bcm/a Baltic Pipe between Norway and Poland. At the same time, there was continued defiance by the Russians concerning the ongoing construction of the Nord Stream 2 (NS2) pipeline in the face of renewed threats of unilateral sanctions by the US and ongoing efforts to bring NS2 under the remit of the EU’s internal energy market via a revision of the Gas Directive.
- Finally, proposed amendments to GB’s gas transmission tariff calculation methodology for the National Transmission System (UNC621 and UNC678) – which could lead to the use of forecasted contract capacity, specific discounts for storages and interruptible capacity products, the elimination of the NTS optional commodity charge and mapping of revenues via transmission and non-transmission service charges – were reviewed by Ofgem. UNC 621 was rejected, but UNC678 was granted an urgent review status.
The data underpinning all exhibits can be downloaded in Excel format from the report section of EOS.