Aurora’s European Gas Markets Forecast offers in-depth insights on the future market evolutions. The analysis presented is generated using Aurora’s gas market model AER-GAS, which contains an unprecedented level of detail on the European gas infrastructure, and is integrated with our other models to capture the complexity of supply and demand.
AER-GLO provides critical inputs to AER-GAS to accurately reflect the unique position of Europe in the context of the global gas market. Our pan-European electricity dispatch model AER-ES EU produces gas-for-power demand, accounting for all the complexity of its drivers.
Together with substantial commentary on market and policy developments over the past quarter, the report presents Aurora’s outlook to 2040 for prices, supply and demand balances and LNG flows.
Key highlights include:
- NW European gas prices are an average of €0.64/MWh (or 3.0%) higher between 2018 and 2025, relative to our August 2018 forecast – driven by rising EUA prices (which increased demand for future deliveries of gas), increasing Chinese demand and injections into European gas storages. Prices are unchanged beyond 2025 until the end of the forecast horizon.
- On the market and policy front, three key areas of change occurred since our last report in August, which should be of note to participants in European gas markets:
- Firstly, prospects for indigenous European gas exploration and production continued to improve, with a robust fiscal outlook leading to new investments being announced in the UK Continental Shelf (despite Brexit preparations), high interest in new acreage in the Norwegian Continental Shelf and the Dutch gas transmission system operator looking beyond Groningen to a future with a higher proportion of renewable gas.
- Secondly, activity in the global LNG market increased, with construction of Mozambique’s Coral floating LNG terminal continuing, Shell’s $31 Billion LNG Canada project being approved, Qatar Petroleum announcing the addition of a fourth LNG train to its expansion plans and Novatek’s Arctic LNG 2 gaining momentum ahead of a FID expected in 2019 – all of which could lead to higher liquidity in European LNG trades.
- Finally, the competition between routes to deliver pipeline gas to Europe heated up, with Gazprom’s Nordstream 2 accelerating to provide first gas by end-2019, Caspian pipeline TANAP almost 100% complete, and a new convention in the Caspian Sea opening up the potential for another sub-sea pipeline, even as the Poland-Slovakia, Baltic Pipe and Polarled pipelines all progressed in their bid to deliver greater quantities of Norwegian gas to compete against Russian and Caspian supply to Europe.
The data underpinning all exhibits can be downloaded in Excel format from the report section of EOS.