LONDON, July 6, 2015 /PRNewswire/ -- European gas
prices are forecast to fall in the period 2016 to 2020 to a level
below that at which U.S. liquefied natural gas (LNG) exporters can
make a profit, according to the latest analysis by Eclipse Energy,
an analytics and forecasting unit of Platts.
In its latest U.K. and North West Europe Long Term
PricePilot, Eclipse warns that, while the U.S. will be able
to export close to 100 billion cubic meters per annum (bcm/a) of
LNG by the end of the current decade, it may struggle to find a
home for all of the gas. With the Asian market looking well
supplied in summers, and limited upside in South America, low spreads may mean U.S.
exports also struggle to find a home in Europe. With U.S. LNG exports expected to
provide a floor for gas prices in both Europe and Asia, this should create an unprecedented
level of price convergence between the three main pricing
regions.
In other key findings:
- Northwest European gas prices are expected to fall to a level
that incentivizes coal to gas switching (there is already some
evidence of this in the U.K., where carbon costs are higher).
- U.K. combined cycle gas turbine (CCGT) demand for gas will
increase in the short term as gas prices fall. But post-2018, power
demand for gas starts dropping off as the National Balancing Point
(NBP) strengthens and new renewable, interconnector and nuclear
capacity comes to market.
- European gas production is in decline, opening up a supply gap
post 2020 to be filled with LNG and pipeline gas from the
East.
- In Asia, the introduction of
market deregulation will bring competition and uncertainty to the
Japanese gas market; competitive supply contracts with flexibility
will be key to success. This is happening at the same time as the
global LNG market is expected to be well supplied and existing LNG
contracts are due to expire. These factors are expected to give
Asian buyers significant "power" and put pressure on traditional
oil-linked Asian LNG contracts.
May Mannes, Eclipse Energy
head of gas analysis said: "The startup of BG Group's
Australian Queensland Curtis project late last year marked the
start of the largest build-up of LNG supply capacity since gas year
2008-2009, with 10 to 12 trains due online by next summer. With
demand struggling to keep pace with supply, we believe this will
mark the start of a transformation of the global gas market, and
drive European gas prices well below where the current forward
curve indicates."
For Editors:
Eclipse Energy's Long Term PricePilot report forecasts
wholesale gas prices for the U.K. and North West Europe for the period from 2016 to
2030 (with a look ahead to 2040). Eclipse's Long Term forecast uses
a stacking methodology to model prices, with the report giving a
comprehensive overview of the supply and demand fundamentals and
the fuel/carbon price assumptions feeding into the price
forecast.
The Long Term PricePilot report is just one of a suite of
Eclipse products focusing on U.K. and Continental gas and power
price forecasting and market analysis for the period from next
month to 2030.
CONTACT
Global, Americas: Kathleen Tanzy,
+ 1 917 331 4607, kathleen.tanzy@platts.com
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SOURCE Platts